FAIR PAY
Workers miss out on gains from growth across the OECD
Workers are gaining less of the proceeds from economic growth right across the OECD, according to a report published by the independent think tank the Resolution Foundation.
The report examines the relationship between economic growth, as measured by GDP per capita, and wages for workers on middle (median) wages over the last 30 years in ten major OECD countries. Countries are then grouped to describe the severity of the situation in each, with the UK in the middle of the pack:
Chronic: the US, Australia and Canada - where median pay consistently grew at less than half the rate of economic output.
Acute: the UK, France and Germany - where median pay tracked growth in economic output for long periods, but increased at less than half the rate of GDP per capita in the last decade.
Mild: Finland, Japan, Denmark and Sweden - where median pay outpaced or tracked GDP in the 1990s, but grew at only around three-quarters of the rate of GDP per capita in the most recent decade.
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Greater inequality in pay appears to be the most significant factor distinguishing the “chronic” and “acute” countries from the “mild”, with wages for the top 10% moving further away from wages for those at the bottom and in the middle of the earnings scale.
The report points to increasing demand for skilled rather than unskilled labour at the same time as a “hollowing out” of middle skilled jobs, greater rewards for shareholders rather than workers, and a reduction in the bargaining power of workers as some of the reasons for the shift.
Resolution Foundation’s earlier report, entitled Missing out, showed that in the UK, of each £100 of GDP, only £12 is now paid as wages to the bottom half of workers, down from £16 recorded 30 years ago.
A final word
“This shows it is not only the UK where lower-paid workers are missing out from the proceeds of growth. This is an issue, to a greater or lesser degree, right across the OECD. The challenge for policy makers in the UK is to look to those countries which seem to be keeping a closer connection between how the economy is doing and the rewards that ordinary workers get, and learn from what they are doing.” - Matt Whittaker, senior economist at the Resolution Foundation and one of the authors of the report.
“The Resolution Foundation report on international trends in who gains from growth is a fascinating piece of research highlighting that workers in the middle of the wage distribution have been receiving a declining share of the proceeds of growth over time. Their work reinforces the need to better understand how we can ensure that workers across all parts of the wage distribution can benefit from growth.” - Steve Machin, Research Director, Centre for Economic Performance, London School of Economics.
Want to know more?
Title: Painful Separation, by Jess Bailey, Joe Coward and Matthew Whittaker, Resolution Foundation, October 2011.
Availability: You can download the 59-page report in PDF format, free of charge, at www.resolutionfoundation.org/publications/.
The Resolution Foundation is an independent research and policy organisation: "Our goal is to improve outcomes for people on low and modest incomes – in particular the 11 million adults in low to middle income households (LMIs), living on below median income but broadly independent of state support." To find out more visit www.resolutionfoundation.org.
The Commission on Living Standards, hosted by Resolution Foundation, has launched a new interactive web site: www.livingstandards.org.