In the latest edition of Fightback, Richard Lynch looks at the facts behind pay in Britain, inflation, jobs, rail fares and more as we head towards the TUC Britain Needs a Pay Rise demo on 18 October 2014.
We have to step up the fight on pay
There was a brief period last spring when the rate of increase in average total pay seemed to edge ahead of inflation for the first time in years. The difference between the two figures was miniscule but it led to a bout of euphoria in government circles and to claims that real pay was finally increasing again. Needless to say, the euphoria was short lived and pay increases quickly fell behind inflation once more. And now it’s even worse, with recent figures showing that increases in average total pay are going into reverse!
According to the Labour Market Statistics for the year to end June 2014, average total pay (including bonuses) actually fell by 0.2% over the year, while average regular pay (excluding bonuses) increased by only 0.6% over the year. This not only failed to match the CPI and RPI rates for June, but was the lowest annual growth rate since current records began in 2001!
Figures from the private pay research organisations, which recorded pay increases in the quarter to end July, were better but still far from satisfactory: Croner put average increases at 1.8%, XpertHR put them at 2%, and both Income Data Services and the Labour Research Department put them at 2.5%.
In addition, the Chartered Institute of Personnel and Development (CIPD) said increases for the six months to end June averaged 2%, down from 2.5% for the same period in 2013. And the EEF manufacturing organisation said that increases in the six months to July averaged 2.6%, up from 2.4% for the same period in 2013.
But averages can be misleading as they include increases in executive pay (which went up by 14% last year) as well as increases for the rest of us, which are much lower or unknown.
Starting salaries, for example, have been stagnating, with only 2% of employers increasing new entrant salaries in line with inflation (according to the CIPD). Pay for young workers in their 20s has also been stagnating and research by the Resolution Foundation has found that almost 1.5 million such workers (29% of the total) are earning less than £7.71 an hour and are officially low paid. And pay rises amongst cleaning staff are frequently non-existent, with large numbers earning between £5 and £7.50 an hour and officially low paid, according to the Equality & Human Rights Commission.
Self employed workers are also suffering, with figures presented to Parliament earlier this year showing that their average annual salaries were only £12,000, half the average for employees. And more recent ONS figures showed that pay for workers who became self employed since the start of the recession is averaging only £207 a week (£10,764 a year).
Women are also losing out in relation to men with a 19.7% pay gap between the sexes, even though it is over 40 years since the 1970 Equal Pay Act was introduced. At this rate, women won’t get equal pay for another 60 years and it will have taken 100 years to get the pay equality which the Act promised!
But, given that economic prospects are supposed to be improving, what are the prospects of improvements in pay over the coming period? XpertHR say that there are ‘positive signs’ as fewer than one in ten pay reviews are now resulting in a pay freeze. But, on the other hand, the Bank of England has halved its predictions for this year and now expects 2014 pay increases to average only 1.25%.
Then again, the matter is to a large degree in our own hands. Most employers have the money to pay more and we have the power to make them if they refuse. It’s time we started making greater use of that power. And it’s time we showed it by making the ‘Britain needs a pay rise’ demonstration, which the TUC is organising in London on Saturday 18 October, one of the biggest demonstrations of worker anger over pay which the country has ever seen. Make arrangements now to be there.
BRITAIN NEEDS A PAY RISE – JOIN THE TUC DEMONSTRATION
Saturday 18 October from 12 noon
Victoria Embankment, London WC2
WE WON’T WIN BETTER PAY BY SITTING ON THE SIDELINES
Inflation is down but rail fares are set to rise sharply
The Consumer Price Inflation statistics published in July and August 2014 showed price increases continuing to yo-yo up and down on a monthly basis, but still high by European standards.
The Consumer Prices Index (CPI) annual figures, which fell from 1.8% to 1.5% in May, increased to 1.9% in June and then fell to 1.6% in July.
The Retail Prices Index (RPI) annual figures were a bit more stable and, after falling from 2.5% to 2.4% in May, increased to 2.6% in June before falling to 2.5% in July.
The CPIH and RPIJ, which were introduced earlier this year as variants of the CPI and RPI, have also been jumping about a bit and their latest figures (for the year to July) are 1.5% for the CPIH and 1.8% for the RPIJ.
The July inflation figures are particularly of interest to rail users as regulated fares are linked to the July RPI figure and usually rise by that figure plus 1% at the beginning of the following year. This would have meant an average rise of 3.5% in January 2015 but George Osborne, knowing that an election was getting close, dropped the additional 1% from the calculations this time.
Train companies, however, have found new ways to increase fares, including by changing the rules for off-peak fares. This means that some fares in Mr Osborne’s constituency will rise by as much as 52% and there are reports of some other fares being set to rise by as much as 162%. Isn’t rail privatisation wonderful!
This means that fares will have risen by almost a quarter between 2010 and next January, according to the Financial Times, while average pre-inflation wages will have risen by only 6.9%, according to the same publication.
Amongst the other items where price increases are outpacing the July CPI rate of 1.6% are fish (5.6%), tobacco (8.1%), house rents (2.3%), sewerage collection (3.2%), electricity (5.6%), gas (5.1%), tools for house and garden (3.6%), hospital services (3.5%), postal services (3.7%), books (9.7%), newspapers and periodicals (7.5%), education (10.3%), and house insurance (2.9%).
However prices of most food items, clothing and financial services have been subject to downward pressure and this explains the reduction in July’s CPI.
Another piece of good news is that CPI inflation in the UK is no longer the highest in the European Union. (Austria tipped us to the top spot in July with a 1.7% increase.) But the bad news is that our prices are rising faster than in almost every other country in Europe. This includes the Euro area (0.4%), the EU (0.6%), Spain (-0.4%), Italy (0%), France (0.6%) and Germany (0.8%).
Nonetheless we are still doing better than some non-EU competitors, including the US (2%), Japan (3.3%) and China (2.4%).
We’re still not out of the woods on jobs
The Labour Market Statistics published in July and August showed most employment and unemployment figures moving in the right direction in the quarters to end May and end June 2014. Employment figures, helped by a growing population, have now matched their pre-recession peak with 73% of 16-64 year olds in employment, but unemployment figures still have a long way to go before they reach pre-recession levels.
Employment increased from 30.54 million at the end of April to 30.64 million at the end of May, but fell back slightly to 30.60 million at the end of June. This still represented a significant increase in employment over the past year but it is worth noting that the self employed made up 48% of all new jobs over that period. It is also worth noting that the proportion of older workers in employment has been increasing, with SAGA reporting that there are now a million more over 65s in jobs than there were in 2010.
Unemployment fell by 121,000 to 2.12 million over the quarter to end May and by 132,000 to 2.08 million over the quarter to end June. This left the unemployment rate at 6.4%, still above the pre-recession level of 5.4% (1.6 million).
Long-term unemployment remains a problem, with 738,000 unemployed for over a year and 407,000 unemployed for over two years. Youth unemployment also remains a problem, with 767,000 16-24 year olds unemployed and the youth unemployment rate at 16.9%. In addition, 8.86 million 16-64 year olds were out of work and considered ‘economically inactive’ but were not included in the unemployment figures.
JSA claimants totalled 1.04 million in June and 1.01 million in July, and are expected to continue falling over coming months. However they remain 229,100 higher than the pre-recession trough of 778,400 in February 2008.
Job vacancies increased to 648,000 in the quarter to end June and to 656,000 in the quarter to end July. The latter figure is 119,000 higher than it was a year earlier but it still leaves an average of over three people chasing every vacancy.
Something must be done about the fall in tribunal claims
There has been another big fall in employment tribunal claims, with the 3,792 submitted between April and June down by a third on the number submitted during the first three months of the year, and down by 70% on the number submitted during the second quarter of 2013. This is clear evidence that the fees now being demanded are pricing workers out of the tribunal system and out of justice.
The fee for submitting simple claims, such as for unlawful deduction from wages, is now £160 and a further £230 has to be paid if the claim gets as far as a tribunal hearing. The fee for submitting a more complex claim, such as for unfair dismissal or sex discrimination, is £230 and a further £950 has to be paid if it proceeds to a hearing.
Such sums may be chicken feed to the ministers who drew up these new rules but they are unaffordable for large numbers of workers who are being treated unfairly by their employers.
There is a remission scheme to help low-paid workers with the payment of fees but it is complicated and flawed, and less than a quarter of workers claiming remission actually get it. One of the reasons for this is that the means-tested scheme is based on household income and savings, rather than on an individual’s income. This means, for example, that a part-time woman worker earning £120 a week could face tribunal fees of up to ten times her weekly earnings if her partner has savings of over £3,000,
Fees might also be avoided through use of ACAS early conciliation but, so far, less than 17% of workers who have used this free conciliation service have secured a pre-tribunal settlement with their employer.
This leaves an awful lot of workers unable to pay the fees and explains the sharp fall in claims submitted. But some categories of claim have fallen by even more than 70% in the past year, not least unfair dismissal claims, which are down by 74%, and sex discrimination claims, which are down by a whopping 91%.
All of this is causing increasing disquiet with a lot of employment lawyers now joining unions and others in demanding an end to the new fees’ regime. The Labour Party has also condemned the new rules, with front-bencher Chuka Umunna describing the system as unfair, unsustainable and prohibitively costly for workers. Regrettably, however, he failed to commit Labour to the abolition of the fees when he addressed the TUC Congress recently, and we need to make clear to Labour that nothing less than total abolition will be acceptable.
In the meantime, it is vital that workers who need to fight unfair treatment through the tribunal system are given every support to do so. This includes financial support and, if it is not available through remission or a union, every effort should be made to organise it through work colleagues and anybody else who is prepared to support the claimant’s fight for justice. It is encouraging to note that some campaign groups and individuals are now mobilising such support through social media, and it is strongly recommended that others follow suit.
It is also a good way to increase knowledge about tribunals, to embarrass bad employers and to make governments think again about undermining and destroying the tribunal system.
Further information on employment tribunals is available on line or via the Employment Tribunal Public Enquiry Line (0300 123 1024) or the ACAS Helpline (0300 123 1100).
So what kind of bonus did you get?
Pay increases may be a bit rubbishy for most of us at present but some people are getting fairly tidy bonuses, if the latest figures from the Office for National Statistics are to be believed.
According to those figures, a massive £40.5 billion was paid out in bonuses across the economy for the year to end April 2014. This represented an increase of almost 5% over the previous year and, unsurprisingly, the industry which saw the highest bonus payments was finance and insurance.
Despite job levels falling by 20% in that industry over the past five years, bonus payments amounted to £14.4 billion, over a third of all bonuses, with the average bonus per employee amounting to £13,300. However it is worth pointing out that staff in your local bank branch will have received nothing like this and will certainly not be getting bonuses equivalent to one, two or more years’ pay, as applies to large numbers of senior managers. They will also not be getting anything like the £874 average weekly wage which the Financial Times reports as being paid in the industry.
The second most generous payer of bonuses was mining, quarrying and oil exploration and extraction, where the average payout was £7,000. Third place went to the information and communication industry, where average bonuses were £4,200.
All other industries were more tight-fisted, with average bonuses in the public sector amounting to only £300 (compared to an average of £1,800 in the private sector) and the average in education, health and social work described as “negligible”.
Average bonuses across the economy as a whole were £1,500 but don’t be surprised if you didn’t get this much. As with pay, the lion’s share of bonuses goes to the richest in society while the poorest, and the majority of those who do the most socially useful work, get little or nothing.
This is why we have to step up the fight for better remuneration and why the TUC’s Britain needs a pay rise national demonstration in London on 18 October must get massive support. We need a better deal on pay and we won’t get it by sitting on the sidelines.
Do you really understand workplace pensions?
I am reliably informed that union general secretaries have a prayer in which they ask their god to “please make pensions boring again”. Fat chance under the coalition, whose radical shakeup of both workplace and state pensions is continuing at a startling pace and is having a huge impact on the pensions system we have known up to now.
Some of their changes are positive, including the auto-enrolment which the coalition inherited from the previous Labour administration and which is helping millions of workers who previously had no occupational pensions to start saving for their retirement.
But other changes are more controversial. These include the planned increases in the ages people need to reach before qualifying for the state pension, and plans to allow workers in defined contribution (money purchase) schemes to withdraw the money in these schemes rather than buy an annuity which will guarantee a lifetime pension.
All of these issues, and more, are of vital importance to working people but could be a nightmare for union reps and others who are asked for information and advice about what the new arrangements mean.
Labour Research Department, as usual, has rushed to the rescue by producing a new guide for union reps on Workplace Pensions. This guide may not tell you everything you need to know about this very complex issue but it will tell you a very high proportion of it. So unless you decide to bury your head in the sand when pensions are brought up, you will benefit from getting a copy of this important booklet.
Workplace Pensions – a guide for union reps is an 88 page booklet which costs £9.45 and is available from LRD, 78 Blackfriars Road, London SE1 8HF (020 7928 3649) or from the LRD website (www.lrd.org.uk).
I recommend that you get a copy.