Almost seven years on from the collapse of Northern Rock, the effects of the financial crisis are still affecting the daily lives of people throughout the UK. There has been a squeeze on living standards across the board and that is going to take years to reverse. But some have been hit harder than others. And many of those same people find life tough in the jobs market even in better times.
We need to change that.
The banking crisis and the deep recession triggered by it have had long-lasting effects on the daily lives of people across the UK. Unemployment rose markedly - though not as high as some predicted. And even for those in work, there has been a long squeeze on incomes.
Standard of living down
So-called "real pay" - the value of earnings after taking account of price rises - has fallen. Using this measure, average pay is 7% lower than before the recession and it's 20% behind where it would have been if the economy had continued to grow on pre-recession trends. Whilst virtually everyone has been affected, it is the lowest paid who have been hit hardest by inflation.
Economic growth (finally)
After a long period in the doldrums, the UK economy is finally on the path back to more robust growth. Employment is growing strongly and 2014 should see pay starting to rise faster than prices. But there is a long way to go to make up all the ground we’ve lost. Most workers are still worse off than they were before the recession and they’re looking to business to restore their standard of living. For many, this will come in time as the economy grows. As we highlight in this paper, the UK has a good record on job creation and raising real pay for the average employee. In the same way that the UK’s flexible approach to working saved jobs in the recession, it will create new jobs and pay growth in the recovery. It will take time for this to happen, so we must adopt policies to accelerate it where we can.
The jobs market must work better for everyone
We must also be honest. For some people the issue of making ends meet is not simply to do with the ups and downs of the economy. Who you are – the background you come from – still has too great an influence on whether you find a job, are able to hold onto it or see your wages rise. This is something we must address. Above all, people must have the chance to progress to better-paid work.
This is an issue that concerns businesses as much as workers. Businesses are at their strongest when they make the most of all the talent available. If there are obstacles that lead to wasted talent and a less diverse workforce, then people are not fulfilling their potential and business can’t fulfil its potential either. They also need a pool of consumers to buy their products with the income those consumers have generated as employees.
A flexible labour market benefits employees too
The analysis we present here shows that the UK’s flexible labour market has been a strength rather than a weakness. It has benefited employees as well as business. It has brought investment and jobs to the UK, ensured workers benefit when firms grow and raised living standards for employees in the good times. But it is not enough on its own – we must do more. There are two areas where we believe further action is needed: higher productivity and improved opportunity.
The CBI will be undertaking further work over the summer with a wide group of stakeholders to develop ideas on how to give people the chances they need to break into more productive work that will pay better
Do you agree with the CBI's analysis? Is a flexible labour market good for employees AND employers? Share your comments below.
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