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Rising City profits have hit wages, says TUC
Rising profits in the financial services industry have come at the expense of workers' wages, stunted business investment and squeezed profits across the rest of the economy, according to a new TUC report published today.
Entitled "Where have all the wages gone?", the report shows that over the last 30 years the share of national income going to wages has fallen from 59% to 53%. Over the same period, the proportion of GDP going to profits has increased from 25% to 29%.
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The falling share of national income going on wages, combined with growing pay inequality, has left workers on median incomes £7,000 worse off per year, the report says. The authors of the report – Howard Reed, founder of Landman Economics, and Jacob Himmelweit, a fellow at the New Economics Foundation – reckon that the main reason for the changing share of gains from economic growth has been the decline of industries that spend a high proportion of turnover on wages, such as manufacturing, and the expansion of new industries that have a far higher profit margin, such as financial services.
The entirety of the rising profit share across the UK economy has gone to just to one industry - financial services - which has increased its share of total UK profits from 1% in 1980 to 15% today.
A final word
“You'd expect business owners across the UK to have benefitted from the tens of billions of pounds lost from people's pay packets. But instead the entirety of those lost wages have simply lined the profits of financial firms. While rising City profits has been good news for a small number of shareholders and the Treasury tax-take, it's been a disaster for the wider economy. The City's hoarding of profits has stifled other industries, reduced business investment and made all but a tiny rich clique of the UK workforce worse off.
“Everyone now agrees we need to rebalance the economy. But the main ways to achieve this - rising investment, more high value manufacturing and engineering, and faster growth in new creative industries - are all being held black by the continuing dominance of the City. If the government really want a more balanced economy that all workers and businesses can benefit from they need to be more courageous in standing up to the City. Ministers mustn't forget that financial firms did more to cause the crash than any other industry, and will block any reform that weakens its influence.' - Brendan Barber, TUC General Secretary.
Want to know more?
Title: Where have all the wages gone?, by Howard Reed and Jacob Himmelweit, TUC, December 2012.
Availability: The report is available in PDF format at www.tuc.org.uk/economy/tuc-21751-f0.cfm.
Rise of City 'has cost workers £7,000 a year', says TUC | The Independent: independent.co.uk/news/business/… via @independent
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