The years of discontent, 2022/23

[Monkey Tennis]

1 hour ago, virginton said:

Teachers' pay (to take just one example) is not 11% lower today than it was in 2010. 

What would be an accurate figure? 

[Todd_is_God]

2 hours ago, DeeTillEhDeh said:

The calculations are based on changes in real not absolute terms ie adjusted for inflation.

Are you saying those are wrong?

The figure that surprises me is the private sector - I would have thought that most people will have had a drop in their earning power irrespective of the sector they are in.

This seems incredbly simplistic, but surely if the majority of workers are in the private sector, and average private sector worker's wages have risen essentially in line with the average inflation rate since 2010, there would be no cost of living crisis as any loss in real term pay in the last 12 months would just be offsetting any gains since 2010?

That clearly isn't the case for the average worker.

I suspect there are a number of very highly paid private sector execs propping that figure up.

[Bonksy+HisChristianParade]

1 hour ago, Todd_is_God said:

This seems incredbly simplistic, but surely if the majority of workers are in the private sector, and average private sector worker's wages have risen essentially in line with the average inflation rate since 2010, there would be no cost of living crisis as any loss in real term pay in the last 12 months would just be offsetting any gains since 2010?

That clearly isn't the case for the average worker.

I suspect there are a number of very highly paid private sector execs propping that figure up.

There’s also a lot of very low paid private sector workers who have seen their wages rise by a lot in percentage terms due to the introduction of the living wage - hospitality etc. It’s a bit ridiculous to lump all private sector roles together really and directly compare them to specific public sector positions.

[Monkey Tennis]

6 hours ago, Todd_is_God said:

I suspect there are a number of very highly paid private sector execs propping that figure up.

The number of "highly paid private sector execs" would have to be absolutely huge in order for that to skew the figures in the way you're suggesting, so I don't think it's that.

[Monkey Tennis]

7 hours ago, Bonksy+HisChristianParade said:

It’s a bit ridiculous to lump all private sector roles together really and directly compare them to specific public sector positions.

Yes, that's probably fair.

The general conclusion that public sector pay has done less well than private sector pay, is legitimate enough though.

Of course that chart deals with very broad brush strokes which eliminate nuance.  That doesn't mean it contains no truth though.  There was a long period during the early 2010s, when teachers' pay kept falling around one percent below admittedly low inflation.  That adds up.

Edited March 16, 2023 by Monkey Tennis

[vikingTON]

11 hours ago, DeeTillEhDeh said:

The calculations are based on changes in real not absolute terms ie adjusted for inflation.

Are you saying those are wrong?

'Real terms' is an absolute garbage claim that belongs in the bin. We don't measure the cost of housing, energy or food in 'real terms' - we use absolute terms to calculate the change in value between 2010 and now. 

If a public sector worker secures a fixed-rate mortgage in 2010 and pays the same monthly payment between then and 2023 (or remortgaged during the ultra-low interest rates on offer throughout the 2010s), then they have more net income to make that payment before other expenses. That's because their salary has not in fact decreased but has in fact significantly larger than when they started paying that mortgage 13 years ago. The bank doesn't get to adjust the loan in 'real terms'. 

Their salary might not have increased by as much as many private sector workers, but they still have more money to meet that crucial fixed expense than they did in 2010. The '10% fall in wages' claim is therefore garbage. 

[vikingTON]

10 hours ago, Monkey Tennis said:

What would be an accurate figure? 

The 2022/2023 salary for equivalent posts (probationary, Level 1, department head roles etc.) LESS the 2010 salary for the exact same positions. Then the percentage increase determined for each role and/or averaged across the board. 

[DeeTillEhDeh]

9 hours ago, virginton said:

'Real terms' is an absolute garbage claim that belongs in the bin. We don't measure the cost of housing, energy or food in 'real terms' - we use absolute terms to calculate the change in value between 2010 and now. 

If a public sector worker secures a fixed-rate mortgage in 2010 and pays the same monthly payment between then and 2023 (or remortgaged during the ultra-low interest rates on offer throughout the 2010s), then they have more net income to make that payment before other expenses. That's because their salary has not in fact decreased but has in fact significantly larger than when they started paying that mortgage 13 years ago. The bank doesn't get to adjust the loan in 'real terms'. 

Their salary might not have increased by as much as many private sector workers, but they still have more money to meet that crucial fixed expense than they did in 2010. The '10% fall in wages' claim is therefore garbage. 

Nominal vs Real Wages is a fundamental economic concept and not the "garbage" you say it is.

https://www.economicshelp.org/blog/2637/economics/real-wages-in-uk/

https://www.iza.org/publications/dp/6500/comparing-real-wage-rates

https://www.economicsonline.co.uk/definitions/real_wages.html/

It will also come as surprise to those of us who teach economics and personal finance courses that part of the content of our courses is apparently "garbage".

 

Edited March 16, 2023 by DeeTillEhDeh

[vikingTON]

1 hour ago, DeeTillEhDeh said:

Nominal vs Real Wages is a fundamental economic concept and not the "garbage" you say it is.

https://www.economicshelp.org/blog/2637/economics/real-wages-in-uk/

https://www.iza.org/publications/dp/6500/comparing-real-wage-rates

https://www.economicsonline.co.uk/definitions/real_wages.html/

It will also come as surprise to those of us who teach economics and personal finance courses that part of the content of our courses is apparently "garbage".

 

When you compare the value of your house to 2010, do you adjust for inflation?

When you go to the pub and the price of a pint has gone up, does the owner claim with a straight face that it has actually decreased 'in real terms'? 

'Real wages' is an abstract concept that bears no relationship to the individual circumstances of a salaried employee. To claim on a public broadcaster that wages have fallen since 2010 - without even referring to the 'real terms' qualifier - is inaccurate and a woeful misuse of statistics. 

Edited March 16, 2023 by vikingTON

[DeeTillEhDeh]

4 hours ago, virginton said:

When you compare the value of your house to 2010, do you adjust for inflation?

When you go to the pub and the price of a pint has gone up, does the owner claim with a straight face that it has actually decreased 'in real terms'? 

'Real wages' is an abstract concept that bears no relationship to the individual circumstances of a salaried employee. To claim on a public broadcaster that wages have fallen since 2010 - without even referring to the 'real terms' qualifier - is inaccurate and a woeful misuse of statistics. 

So it's not the concept you disagree with but the lack of quantification.

I've no problem with the concept, and,  yes it should have been quantified.

From an economic comparative point of view, I think it is flawed though, because it didnt compare different job roles in the private sector.with different jobs in the public sector.  Lumping the diverse private sector into one is probably not a valid comparison. 

I did also I say that I was surprised that there was a real increase in private sector wages - the reality is that since 2010 there will be a substantial number of people within both sectors whose wages will have fallen in real terms - or some whose wages were very low in 2010 but increased substantially due to the Living Wage.

Possibly a case of comparing apples with oranges.

For an individual it might matter if your wage is falling substantially in real terms - when inflation is a lot higher than wage rises then clearly you are going to have a more noticeable shortfall in expenditure than when inflation is much lower.  At lower inflation levels it's much easier to take account of any discrepancy with wage rises as the difference is normally much less noticeable and the change much more gradual.

The sudden rise in inflation is what's been the real killer for a lot of people's budgets.

 

Edited March 16, 2023 by DeeTillEhDeh

[Monkey Tennis]

10 hours ago, virginton said:

The 2022/2023 salary for equivalent posts (probationary, Level 1, department head roles etc.) LESS the 2010 salary for the exact same positions. Then the percentage increase determined for each role and/or averaged across the board. 

So we can only consider the worth of salaries in absolute terms?

Seriously?

 

So compared to people in comparable work in say, the 1970s, each of us is in fact fabulously wealthy?

[vikingTON]

1 hour ago, Monkey Tennis said:

So we can only consider the worth of salaries in absolute terms?

Seriously?

So compared to people in comparable work in say, the 1970s, each of us is in fact fabulously wealthy?

We cannot consider wages to have fallen since then, no. And anyone who bought property in the 1970s will indeed find themselves to be very wealthy, because the bank doesn't get to ask for real terms value. 

A scenario that applies just as much to many secure-job public sector workers who have seen their principal asset massively increase and their main outgoing stay largely fixed between 2010 and 2022 - all while their take-home pay increased. 

[Monkey Tennis]

22 minutes ago, virginton said:

We cannot consider wages to have fallen since then, no. And anyone who bought property in the 1970s will indeed find themselves to be very wealthy, because the bank doesn't get to ask for real terms value. 

A scenario that applies just as much to many secure-job public sector workers who have seen their principal asset massively increase and their main outgoing stay largely fixed between 2010 and 2022 - all while their take-home pay increased. 

So your strange contention that 'real terms' isn't a thing, is dependent on property ownership.

[vikingTON]

Alongside all other prices and values that aren't measured in your beloved 'real terms'. 

[coprolite]

23 hours ago, virginton said:

'Real terms' is an absolute garbage claim that belongs in the bin. We don't measure the cost of housing, energy or food in 'real terms' - we use absolute terms to calculate the change in value between 2010 and now. 

If a public sector worker secures a fixed-rate mortgage in 2010 and pays the same monthly payment between then and 2023 (or remortgaged during the ultra-low interest rates on offer throughout the 2010s), then they have more net income to make that payment before other expenses. That's because their salary has not in fact decreased but has in fact significantly larger than when they started paying that mortgage 13 years ago. The bank doesn't get to adjust the loan in 'real terms'. 

Their salary might not have increased by as much as many private sector workers, but they still have more money to meet that crucial fixed expense than they did in 2010. The '10% fall in wages' claim is therefore garbage. 

You mean "nominal terms" not "absolute terms". 

Real terms is much more meaningful as the value of £1 is determined by what it can buy not what number it's denominated in. It's not a perfect metric and open to interpretation (eg do you use CPI or the GDP deflator) but it's far less arbitrary than the number of currency units of declining value (declining at a variable rate). 

Your example of mortgages is just wrong. The measure is like for like, not tracking the pay progress of an individual through their career. 

Mortgage rates haven't gone down  but have gone up and house prices have gone up by more than inflation, so a new teacher, nurse or Junior Doctor today will have to spend more not less out of their take home pay than in 2010.

[vikingTON]

25 minutes ago, coprolite said:

You mean "nominal terms" not "absolute terms". 

Real terms is much more meaningful as the value of £1 is determined by what it can buy not what number it's denominated in. It's not a perfect metric and open to interpretation (eg do you use CPI or the GDP deflator) but it's far less arbitrary than the number of currency units of declining value (declining at a variable rate). 

Your example of mortgages is just wrong. The measure is like for like, not tracking the pay progress of an individual through their career. 

Mortgage rates haven't gone down  but have gone up and house prices have gone up by more than inflation,

There's nothing 'nominal' about it. It is an increase in your take-home pay just as much as an increase in the price of a pint (or a decrease in the price of a smart phone) are not 'nominal' changes. 

I wasn't discussing mortgage rates (which in any case were at historic lows between 2010 and last year) but rather the cost of financing the property itself. You do not pay your mortgage in 'real' terms but rather in absolute terms, which is the biggest fixed outgoing for practically anyone in the UK who has a good starting salary and ironclad job security into the future. Which is the reality for any public sector worker like teachers, mewling about their conditions compared to the private sector. 

A teacher's pay has increased year on year since 2010. Their mortgage for an equivalent property has stayed the same, if not decreased over that same time period. So the idea that they've had a 10% cut to their wages is categorically wrong in absolute terms and the 'but real wages!!!111!!!' claim can be chucked in the bin too.

The concept of 'real wages' is only useful to confirm two points in this debate:

1) Governments have undoubtedly been limiting public sector wage increases to manage public spending - although this is only a confirmation of the 'austerity' policy you'd have to be living under a rock to not know about.

2) New employees in public sector jobs undoubtedly start from a relatively poorer position in terms of their outgoings than their equivalents did 12 years ago. 

It demonstrates nothing of value about the experience of salaried staff between those two points in time though. 

Edited March 17, 2023 by vikingTON

[scottsdad]

Why are we now comparing wages (real and absolute) against mortgages?

 

[coprolite]

2 hours ago, virginton said:

There's nothing 'nominal' about it. It is an increase in your take-home pay just as much as an increase in the price of a pint (or a decrease in the price of a smart phone) are not 'nominal' changes. 

I wasn't discussing mortgage rates (which in any case were at historic lows between 2010 and last year) but rather the cost of financing the property itself. You do not pay your mortgage in 'real' terms but rather in absolute terms, which is the biggest fixed outgoing for practically anyone in the UK who has a good starting salary and ironclad job security into the future. Which is the reality for any public sector worker like teachers, mewling about their conditions compared to the private sector. 

A teacher's pay has increased year on year since 2010. Their mortgage for an equivalent property has stayed the same, if not decreased over that same time period. So the idea that they've had a 10% cut to their wages is categorically wrong in absolute terms and the 'but real wages!!!111!!!' claim can be chucked in the bin too.

The concept of 'real wages' is only useful to confirm two points in this debate:

1) Governments have undoubtedly been limiting public sector wage increases to manage public spending - although this is only a confirmation of the 'austerity' policy you'd have to be living under a rock to not know about.

2) New employees in public sector jobs undoubtedly start from a relatively poorer position in terms of their outgoings than their equivalents did 12 years ago. 

It demonstrates nothing of value about the experience of salaried staff between those two points in time though. 

You can admit when you don't understand something you know

[hk blues]

22 minutes ago, scottsdad said:

Why are we now comparing wages (real and absolute) against mortgages?

 

Mainly because the graphic omitted to include a very relevant factor - that the percentages were in real terms rather than absolute.  

[HoBNob]

Are the full figures available for that graph? Would be interested in how my public sector job compares.