Your article on wages opens by stating that “workers no longer seem able to secure decent pay rises even when employers are struggling to recruit”, (“ Low wage growth puzzles economists”, September 12). This is not justified by the data published.

The monthly Office for National Statistics earnings figures are total wages divided by the number of employees. In normal times that sort of average is fine, but the past few years have not been normal in the UK labour market. The job creation has been exceptional and a disproportionate number of the jobs have been created at the lower end of the pay scale.

This so-called compositional change has reduced the average as measured and means that the headline figures do not accurately reflect what the majority of individual employees experience.

An alternative ONS data set (the Annual Survey of Hours and Earnings) hints at the scale of distortion. Over the last five and 10 years, the median pay of the continuously employed — people who keep the same job for a year — has risen by a little over 4 per cent compared to under 2 per cent for the total.

Using a 4 per cent figure, which is more typical of what a person experiences, would mean that the “puzzle” at the heart of the latest reporting evaporates — and the degree of gloom required in the reporting of the economy is reduced.

The problem is not that “workers no longer seem able to secure decent pay rises”, rather that new entrants are mostly being offered low paid work. That is not a puzzle but is a clear and serious issue for the people involved and the economy’s productivity prospects. It needs addressing, and the misdirection from the quoted eminent economists will not help policymakers develop the right response.

Simon Briscoe
Consultant, London N6, UK

Get alerts on Letter when a new story is published

Copyright The Financial Times Limited 2019. All rights reserved.
Reuse this content (opens in new window)