It is no longer generating rising earnings for a majority of the population, and young people today are set to be poorer than their parents.
On the face of it, a lot has changed in the British economy since August 2007. GDP has grown over 10%. The employment rate – at 73 per cent – is today the highest it has ever been.
But underneath the headline figures the UK economy is still reeling from the effects of the financial crisis. As the report of the IPPR Commission on Economic Justice published yesterday shows in devastating detail: the economy is not working for all.
This has been the slowest recovery of any major recession since the 1970s – at a corresponding stage of recovery after the recessions of the 1970s, 1980s and 1990s, GDP was proportionately 6%, 19% and 18% higher respectively than today.
Productivity – which is what we rely on to drive long-term increases in economic growth – has stalled since 2008 and is now 13 per cent below the G7 developed economy average.
Employment may be at record levels, but many people work fewer hours than they would like – as many as 8% in some surveys. And the labour market is increasingly insecure.
The number of people on zero hours contracts has increased more than five-fold since 2007.
Self-employment has increased from 13% of the workforce in 2008 to 15% today, yet self-employed people earn less on average than they did 20 years ago.
Meanwhile real median household incomes are only 5% higher today than they were in 2007. This is 10-15% below what might have been expected based on pre-crisis growth rates.
The last decade’ has effectively cost the average household around £4,000 in lost income. In fact, the UK’s record on wages since the crisis has been one of the worst in the developed world – only Greece, Mexico and Portugal have seen larger falls.
Despite this poor economic performance, inflation is edging up to levels last seen before the price of oil crashed in 2014. With nominal earnings stagnant, this will have a severe impact on real wages in the UK over the coming years.
In fact, the Institute for Fiscal Studies expects real incomes for the poorest fifth of the population to fall over the next five years, even as they continue to grow for the top 1%.
And alongside this has been the explosion in household debt. This is tied to the stagnation of real wages, /as households try to maintain their standards of living.
Average household debt now stands at 142 per cent of household income. As the Bank of England has warned, if this trend continues, household debt will have surpassed its 2008 peak in under three years’ time.
But this bleak picture doesn’t reflect the experience of everyone in the UK.
Company chief executives are now paid around 150 times the salary of the average worker, up from 20 times just thirty years ago.
Between 2010 and 2015, average pay for directors of FTSE 100 companies rose 47 per cent, often unrelated to the performance of their companies.
In fact, only 10 per cent of the wealth generated since 1979 has gone to the bottom 50 per cent of the income distribution.
The bottom third have gained almost nothing from the economic growth witnessed since then. The richest 10 per cent, meanwhile, reaped almost 40 per cent of the rewards of economic growth over this period.
As inequality between the 1% and the rest continues to increase, 22 per cent of the population still lives below the poverty line. This amounts to 14 million people living in poverty in modern Britain, including 4 million children.
But the experience of poverty has changed over the last 30 years. Such is the prevalence of low pay today, 54% of people in poverty now live in a working household. Where once work was a longer a reliable route out of poverty, this is no longer true.
Young people have had a particularly tough time. Stagnating incomes combined with huge increases in house prices over the last 20 years mean that millennials can expect to be the first generation in decades to be less well-off than their parents.
And there are marked geographic inequalities too. Indeed, the UK economy is now the most geographically unbalanced in Europe, with 40% of national income now produced in London and the Southeast.
Median incomes in the North West, West Midlands, South West and Wales are now more than 40% lower than in London and the South East; in Scotland over 20%.
It is not that we are not producing enough, or that we cannot afford to pay for the infrastructure and public services that would support the kind of sustainable growth we need.
It is that the gains from economic activity are concentrated at the top of the income spectrum, whilst the standards of livings crisis at the bottom is masked by unsustainable levels of household debt driving equally unsustainable levels of consumer spending.
The interim report does not simply lay out these trends, it analyses the structural problems that underlie them – from short-termism in the financial sector to an overly flexible labour market, from the fiscal failure of austerity to the decline of our manufacturing sector.
But one conclusion appears irresistible. This is that the UK economy is marked by a stark concentration of economic power in too few hands. Many of the most fortunate people in our country live lives increasingly remote from those of the majority, and this is fuelling a growing sense of economic injustice.
Only by redistributing economic power itself can we hope to heal the divides that have opened up in our economy since the crisis.
From strengthening trade unions, to reforming our tax system, to devolving the levers of economic policymaking, the IPPR Commission on Economic Justice will be exploring over the coming year a range of radical policies to build a sustainable and just economy for modern Britain.
Grace Blakeley is a Researcher at IPPR.
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