January 31, 2014 6:42 pm

The incredible shrinking pay packet

‘It seems to me that the one thing rising faster than the rate of inflation is the growth in inflation measures’
Illustration by James Ferguson of a hand holding sterling notes©James Ferguson

There are some “positive signs”, Britain’s prime minister said last week, that people’s take-home pay is rising faster than inflation. Indeed, the Office for National Statistics reported that annual take-home pay in 2013 rose by more than the Consumer Price Index for the first time for several years.

So do we all feel better off? I certainly don’t. Unlike My Cleverest Girlfriend, who writes for a living and each year negotiates a rise for her work based on the rate of inflation, I tend to agree a price at the start and then don’t give it another thought until I change jobs or take on a new assignment. She is not called MCG for nothing!

I have consulted many of the other Girlfriends, none of whom feels better off. Why is that? Could it be that, like me, they never will until all their children cease to be earnings-diluting? Or could it be that my Girlfriends are in the top 10 per cent of earners in the UK? According to the ONS, that’s the only sector of society whose take-home pay lags behind inflation.

But there are many other reasons why these super-smart women, unlike MCG, have failed to increase their earnings by more than the rate of inflation. Many of them are in jobs that are prestigious but pay very little. This phenomenon is not restricted to women; there is currently an active ballot for membership of the main committee of the Marylebone Cricket Club because four members are needed and eight candidates – all men – have been nominated. Membership of the MCC main committee is a time-consuming and unpaid job but lots of people want to do it. Similarly, have a look at the board of trustees of the Royal Botanic Gardens at Kew or the British Museum, as examples of voluntary and demanding roles. Even I was approached by a headhunter late in 2013 for a role that requires several days a month, and lots of travel, all unpaid. Although I am flattered and intrigued, it is almost certain that I don’t have the time. But these are interesting, prestigious roles, and earning money for them is not something the Girlfriends (or I) expect.

Some of my Girlfriends do have full-time unpaid jobs – my Ducal Girlfriend, for instance, has a full-time job as the wife of a duke. She is the chatelaine of an estate that includes a castle, several thousand acres of farmland and a priceless collection of paintings – and she took all that on for love rather than a negotiated salary. No wonder she buys all her clothes from second-hand dress agencies.

But perhaps it’s the government’s choice of statistics that is to be blamed for the Girlfriends, even possibly MCG, not feeling that much richer. The CPI leaves the costs of your home out of the basket from which it produces its statistics, which is hardly realistic. DG’s castle has been in the family for 500 years, so I assume she doesn’t have a mortgage but there will be council tax, which the CPI doesn’t measure. The Retail Price Index includes those measures but if it is to be relevant to many of the Girlfriends then I suspect that more deliberation will have to go into whether its basket of items contains a pair of Jimmy Choos rather than whether block butter and spreadable butter should have equal weighting.

The CPI-versus-RPI debate has been raging for many years but even those Girlfriends who understand the difference will soon have to return to their textbooks. The ONS is planning to publish not one but two new ways to measure inflation: the RPIJ (the RPI using maths like the CPI, the J is for Jevons, the chap who invented it) and CPIH (the CPI with housing prices added in).

It seems to me that the one thing definitely rising faster than the rate of inflation is the growth in inflation measures. But that’s not going to make any of us feel better off. The average weekly pay may have risen from £472 to £475 and that’s a positive sign. But I suspect none of my particular Girlfriends will be rushing to crack open the Krug just yet.

mrsmoneypenny@ft.com

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