The rise of insecure work in the gig economy has fuelled a “lost decade” in wage growth in Britain, according to the Bank of England’s chief economist.
In a speech to trade unionists and businesses, Andy Haldane said wage growth was beginning to increase across the country, although warned that many people in insecure and poor quality work had meagre increases in recent years.
He said that although some workers liked the flexibility of zero-hours contracts and work in the gig economy, “the dark side of job flexibility is increased income uncertainty and job insecurity”.
“In short, job insecurity reduces workers’ pay power and weakens upward pressure on pay,” he added.
Britain is on track for the biggest squeeze on wages since the end of the Napoleonic wars despite unemployment levels at their lowest since the mid-1970s.
While job insecurity owing to the 2008 final crash has decreased, there has been an increase in insecure work due to an increase in the use of flexible contracts, Haldane said.
Highlighting research that shows the amount of poorer-quality work has increased in recent years, he said survey data showed 1.7 million people could be suffering from high levels of anxiety about their uncertain hours. As many as a quarter cannot find a permanent job.
Economists believe almost half of people on zero-hours contracts want more regular work, with the number of people on such contracts having risen from about 200,000 at the turn of the millennium to almost a million this year.
Haldane said there were wage discounts of up to 15% for self-employed workers compared with full-time employees, while people on temporary contracts, recruited by agencies and on zero-hours contracts also had weaker pay.
Haldane also identified falling levels of unionisation since the 1970s, weak productivity growth and the rise of automation had also had an effect on wage growth.
“Over recent decades, unionisation rates have fallen by 30 percentage points. Using the long-run estimates, that will have lowered wage growth by around 0.75 percentage points per year over the past 30 years, a significant effect,” he said.
The rise of monopolistic firms and a greater concentration of corporate power has also had an impact on workers’ ability to demand higher wages, he aded.
Despite the negative backdrop for pay, Haldane said the strongest pay growth was among people moving jobs.
Annualised average weekly earnings excluding bonuses in the three months to the end of July increased by 2.9% compared with a year ago, up from 2.7% in the quarter to the end of June.
The Bank has gradually begun raising interest rates above the level set almost a decade ago. One of the reasons, it argues, is that wage growth is about to accelerate because of low levels of unemployment.
Haldane said: “There is more compelling evidence of a new dawn breaking for pay growth, albeit with the light filtering through only slowly.”
Figures from the Office for National Statistics for July, the most recent available, show average total pay including bonuses stood at £491 per week, which is about £31 lower than the pre-downturn peak of £522 a week.
