30 June 2017
Bank of England Economist Andy Haldane told BBC’s Newsnight that the growth of “low productivity businesses” has been a key factor driving the fall in real wages across the UK.
“The root cause of the stagnation in productivity and pay is that long lower tail of firms. They’re taking the low-productivity road,” he said, saying businesses need to invest more in innovation.
“We’ve gone through, for most people, a pretty extraordinary, almost unprecedented period of real take home pay having flatlined for the better part of a decade, and that is well beyond anyone’s historical experience,” he added.
“And understandably people are feeling frustrated and squeezed by that squeeze on their purchasing power in the shops.”
Indeed, the Office for National Statistics today reported the worst squeeze on household incomes since the 1970s, with disposable income falling for the third consecutive quarter. It fell by 1.4% in the first three months of 2017 due to higher inflation and weak pay growth.
The Institute of Employment Rights has also pointed to low-productivity trends in British business as a result of labour laws that encourage industry to compete on a race to the bottom on workers’ rights, including pay rates.
Weakening in labour laws and the introduction of anti-trade union legislation, which protects workers’ rights, over the last 35 years has incubated the growth of insecure work, such as temporary, agency, bogus “self employed” and zero-hour contracts work.
In our Manifesto for Labour Law – which acted as the blueprint for the Labour Party’s General Election Manifesto 2017 on workers’ rights – we put forth 25 recommendations for reform.