Are Wages Rising Again?

The financial crash of 2008 saw countless people lose their jobs and suffer the pain of low pay and short working hours as businesses cut costs. Now the economy is in recovery and many companies are doing well once again, so it seems reasonable to assume wages are increasing. But to the surprise of many they are not. Why?


Even though youth unemployment is high general levels of unemployment have fallen in recent years, as the private sector creates jobs and more people start more new businesses.

The jobs created are largely as a result of an increase in self-employment and employers taking on part-time and temporary staff; full-time employees too are making a comeback albeit at a slower pace as the economy battles austerity.

Even with the birth of more new jobs and more new businesses and a fall in the numbers of people in unemployment, wage levels in many areas are not rising and in some instances static or still falling.

Economists argue it is only a matter of time before the recovery triggers renewed demand and therefore higher wages, as is the traditional and expected post-recession pattern.

This time it’s different

This time, however, it is different as wage rates in many areas remain low and show little inclination or intention of changing any time soon.

Some factors that make the recovery more difficult include the number of people working on flexible and zero hour contracts and a growth in the number of people in self-employment.

The effect of technology as it replaces what were once reliable, well-paid and secure jobs coupled with the growing numbers of low-wage jobs are also working to subdue levels of pay.

There is no doubt the recession hit businesses hard and while jobs have returned in areas dominated by low pay, employers with well-paid jobs remain reluctant to offer long-term commitments or take on permanent staff.

A changing labour market

The labour market has changed in recent years as it moves from an inflexible, rigid model to one dominated by flexibility and the ability to minimise high levels of unemployment in times of recession.

But the effect of such flexibility is that even though unemployment stays relatively low so do wages, as more people work in low paid, part-time and zero-hour jobs.

Employers too are more likely to address non-pay issues such as pensions and other indirect benefits when the good times return, rather than increase direct pay or offer permanent and secure posts.

The trend, however, is having an unpleasant and unwelcome side effect as the gap between low-paid and high-paid workers increases disproportionately and unfairly, highlighting the danger of creating a two-tier economy divided between those with ‘good’ jobs and those with ‘not-so-good’ jobs.

SO, even though the recession is over many people don’t feel better off because wages remain low to reflect a more painful and prolonged economic recovery.