Graphs at a glance: Middle-paying jobs have been disappearing for years. Is that why in spite of the economic recovery, wages are still stagnant?

It used to be the case that when unemployment fell wages rose. Bank of England figures show this has been true up to the last recession, but stopped being true since the recovery that started in 2013. According to Ben Broadbent, a deputy governor of the Bank of England, 

“average pay growth [in 2014] is almost 2% points – more than four standard deviations – weaker than the 1993-2012 regression line (Chart 10)."

Statistically “four standard deviations” means this 2% deficit is extremely unlikely to be due to random chance. As James Bond, had his civil service career taken him into the Office of National Statistics, would have put it “four standard deviations is enemy action”.

So what is happening? A report by the think tank Centre For Cities provides some insight. While the number of both high pay and low pay jobs has been increasing, the number of mid pay jobs has been falling. A trend that has existed for decades:

The increase in 'high pay' has been faster than the increase in 'low pay'. Which is good nationally, but is not much comfort for those shifting down into low pay jobs.

The impact of this is different in cities across the country. In some places 'mid pay' jobs are mainly being replaced by 'high pay', while in others the jobs tend are moving into the 'low pay' category:

The overall impact of this can be seen in the graph below by the Inequality Briefing think tank, who commented: 

"The economy has grown by almost 50% since 1994, while ‘GDP per head’ – the value of the UK economy divided by the number of people living in the UK – has increased by nearly 40%. 

But over the past two decades ‘median incomes’ (‘those who are exactly in the middle of the income distribution - they earn more than the poorest half of the population but less than the richest half) have only risen by 20% - and have fallen dramatically since 2009, despite the economic recovery. This suggests that as the UK gets richer, it is mainly people at the top who are benefiting."

The types of jobs in an economy change all the time. This is generally a good thing. But all sorts of people find themselves on much lower pay for reasons outside their control.  "Self service" technologies have cut swathes of jobs from supermarkets to libraries to highstreet banks. The newspaper CityAM reported that "most bank branches could close over the next 10 to 20 years". Newly created high-pay jobs requiring new high-value skills tend not to go to middle aged redundant bank staff.

The Welfare State aims to provide a decent standard of living for everyone. When a politician offers to sacrifice the welfare state in return for lower taxes, think hard before you vote for them. You may not need high quality free health, education etc now. But you, or your children, or other people whose mid-pay jobs have evaporated, may need them in the future.