Double Whammy

Hello Bloggers

There’s arguably a close correlation between the rate of inflation and pay awards…that correlation was most controversially manifest when the Government in 1979 sought to restrain pay awards leading to widespread industrial relations unrest – culminating in the infamous ‘Winter of Discontent’.

Pan forward 32 years and the current Government is once again endeavouring to contain inflationary trends whilst also restraining pay awards – hence the current Local Government pay freeze. This time though there’s a significant difference; inflation is being ‘fuelled’ by rising global prices in oil as well as commodities – in particular driven by international food shortages, rather than national remuneration demands.

The latest inflationary trends (and the ensuing impact on UK employment) have been evidenced by payments processing company Vocalink. These data demonstrate inflation is running three times the rate of private and public sector pay increases. The corollary of which is employees in real-terms are enduring a pay cut as wages fail to keep pace with rising prices and take-home pay takes a hit.

Vocalink’s chief executive comments “It’s double bad news for consumers because not only is there a real drop in take-home pay, inflation is going up at the same time”. Add into the equation the increase in VAT to 20% and there is an ominous portent for the UK economy and recovery from the worst recession since the Second World War. These trends also have implications for employment…the public sector is announcing significant redundancies (such as Manchester’s recent job loss announcement of 2,000 employees).

I have genuine concern about how the predicted 500,000 public sector redundancies will move successfully into employment with the private sector. I anticipated this a  long time ago on this blog (See The Beveridge Curve, and It’s All About Equilibrium posts).

Without economic growth in the private sector there won’t be new jobs anytime soon to stimulate a stagnant jobs market.


By | 2017-07-30T12:23:30+01:00 January 18th, 2011|Categories: Dean Shoesmith|0 Comments

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