Wages and Living Standards: What is Really Happening?

Wages and Living Standards: What is Really Happening?

By Terry McCarthy


Sorry to repeat myself, but:

The way the BBC and other Tory media outlets, interpret and report on government statistics reminds me of Orwell’s Ministry of Truth. The latest bit of disinformation comes with their interpretation of the latest unemployment and inflation figures;

The establishment masseurs assert that workers’ wages have increased over inflation - asserting that that in the three months to July wages outstripped inflation, with wages rising by 2.9%, as opposed to inflation at 2.4%.

These government figures are based on the mean average calculation. However if we look at the state’s own class structure in relation to wages and salaries we get a totally different picture.

The government’s new classifications of class are based on the occupation of the head of the household. (By that they mean the person earning the largest wage or salary, which discriminates against single parents on low incomes as class A and B usually have more than one source of income).

Grade Social Class Chief income earner’s occupation 

A upper middle-class Higher managerial, administrative or professional 
B middle-class Intermediate managerial, administrative or professional 
C1 lower middle class Supervisory or clerical and junior managerial, administrative or professional 
C2 skilled working class Skilled manual workers 
D working class Semi-skilled and unskilled manual workers 
E non-working

As in previous months we see a rise in wages/salaries for class A and a section of class B and a small section of skilled workers in construction and engineering, which totally distorts the wage picture of those categorised in groups C1.C 2. And D. (These groups make up the majority of the workforce) As in previous months, we see that social class A has salary rises over and above real inflation, with social classes C2 and D. seeing a further deterioration in their purchasing power.

A closer examination of employment shows that the majorities of new jobs are in the gig economy and pay the minimum wage. Government reports show minimum wage jobs, the number of jobs paid at or below the minimum wage, has increased since it was first introduced in 1999. It estimates over 1½ million workers are being paid less than the minimum statutory wage. Other agencies put this figure higher. 

Each time the unemployment rate falls, so (because of low pay) does the applications for in-work state benefits. Over £46 billion goes on family benefits, income support and tax credits. This amounts to a direct subsidy for role-playing employers and encourages low pay The total unemployed payments are £2.2 billion.

This includes benefits such as Child Benefit and support for people on low income. Around £2.2 billion goes to the unemployed.

As with the bogus claims in relation to a fall in inflation for the poorest we see an increase in the use of food banks for the marginalised and the working poor.


Government agencies use the same formula e.g. mean averages to determine inflation against a basket of goods. Drop in prices for nannies, furniture, restaurants hotels and miscellaneous goods (although these items are weighted) totally distorts the effects of price rises on essential goods such as food, rent clothing, etc., especially for the working poor and the marginalised e.g. someone on £1,000 a week is hardly affected by a 3% rise in the price of essentials whereas it can devastating for someone on £100 per week. The ever widening earnings gap between different groups of workers makes nonsense of the mean average. The only way that could work if everybody earn roughly the same amount and the goods in the basket, were for the essentials. Using the purchasing power formula the poorest in society are suffering inflation over three times that of the government’s figures.

Consumer Prices Index Table 1: Allocation of items to Consumer Prices Index 
1 Food and non-alcoholic beverages 
2 Alcohol and tobacco 
3 Clothing and footwear 
4 Housing and household services 
5 Furniture and household goods 
6 Health 
7 Transport 
8 Communication 
9 Recreation and culture 
10 Education 
11 Restaurants and hotels 
12 Miscellaneous goods and services 
Source: Office for National Statistics 

Unfortunately, the official Labour Party website accepts the government inflation statistics.


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