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The Big Political ProblemWith Boris Johnson’s Wage Pronouncements
The Prime Minister’s latest inaccurate narrative is fraught with potential embarrassments, says Sam Bright
The Prime Minister enters this year’s Conservative Party Conference with multiple problems, ranging from a spike in household energy prices to a shortage of petrol at the pumps.
Always eager to twist the debate in his favour, however, Boris Johnson has unveiled a counter-narrative to distract the media and prevent a political calamity: suggesting that wages are rising rapidly “for the first time in over a decade”.
First, it’s worth getting the facts straight. The Prime Minister faced a spat with the BBC’s Andrew Marr on Sunday morning, with the latter suggesting that Johnson was lying about wage increases. According to Marr, official Government data shows that wages are not rising in real terms – i.e. taking inflation into account.
While inflation is certainly an issue – one that is not expected to abate any time soon – Marr’s statement about wages was based on a misreading of the data. The Office for National Statistics (ONS), cited by Marr, says that real wage growth fell in the latest accounting period, from May to July this year. So, while wages rose – regular pay increased by 4.5% during these three months – they grew at a slower rate than the previous accounting period (from April to June). “In real terms (adjusted for inflation), total and regular pay are now growing at a faster rate than inflation,” the ONS report says. The difference between declining wage growth and declining wages appears to have befuddled the BBC.
However, Johnson is still caught in a political bind. On the one hand, a slowdown in wage growth suggests that inflation may soon outstrip pay rises – something that will puncture the Prime Minister’s rhetoric around wages.
On the other, if wages continue to increase, this may create an even bigger political headache for the Conservatives. Last November, the Chancellor announced that the wages of public-sector workers would be frozen this year, with an exemption for NHS workers and those earning less than £24,000 a year. In July, it was announced that NHS staff would receive a 3% pay rise.
Rishi Sunak justified this restriction of public sector wages by saying that the private sector had suffered disproportionately during the Coronavirus pandemic. “In such a difficult context for the private sector, especially for those people working in sectors like retail, hospitality and leisure, I cannot justify a significant, across-the-board pay increase for all public-sector workers,” he said.
Yet, as private sector wages start to rebound – and if this trend continues – the Government will come under significant pressure to unlock the wage austerity of the public sector. For example, wage growth throughout the economy in June (excluding inflation) was 8.8%. Wage growth exceeded 10% in the private sector, yet was only 2% in the public sector.
Johnson cannot feasibly brag about wage growth while the people who cared for the nation during the pandemic still suffer from restrained incomes, imposed by the Government. In June, by contrast, the ‘finance and business services’ sector experienced a wage increase of 12.4%.
Complications
The Prime Minister’s proud pronouncements on wages are also tempered by two underlying factors.
First, wages are merely recovering from the effects of COVID-19 restrictions. In February 2020, for example, average weekly earnings in the whole of the UK economy stood at £554, falling to £525 by May 2020, and increasing to £575 by June 2021.
In construction – a sector now displaying rapid wage growth – average weekly earnings stood at £643 in February 2020, dipping to £573 by May, before rising to £672 by June this year. Rising wages must therefore be understood in the context of tumbling incomes during the worst months of the pandemic.
The Government has also been widely accused of mishandling the crisis, causing longer lockdowns and higher deaths than necessary. Aside from the devastating health impacts, these tough restrictions hammered the economy – and make current wage increases look more impressive than they actually are.
What’s more, Johnson’s wage-growth narrative is juxtaposed with recent history. The Prime Minister has been at pains to emphasise that wages are “finally” growing after more than a decade of stagnation. However, as voters will remember, the Conservative Party has been in office since 2010 – and so has been responsible for flatlining incomes.
Between April 2010 and April 2018, for instance, the median pre-tax weekly earnings of an employee in the UK fell by around 3% in real terms. In December 2019, when the Conservatives won a landslide general election victory, total pay was still 3.7% below its peak in February 2008. In May 2018, the Trades Union Congress reported that the UK had not experienced a similar period of wage stagnation for 200 years.
As usual, Boris Johnson’s rhetoric is a one-dimensional misrepresentation of reality. Whichever way the situation unfolds, there seems to be a good chance that it will backfire on the Prime Minister.