National Minimum Wage

National Minimum Wage
4
Figure 1.1: Effect of Revisions to Gross Domestic Product, UK, 2007-2011
GDP growth on previous quarter (per cent)
1.5
1.0
0.5
0.0
-0.5
-1.0
-1.5
-2.0
-2.5
2007 Q2
2007 Q3
2007 Q4
2008 Q1
2008 Q2
2008 Q3
2008 Q4
2009 Q1
2009 Q2
Previous data
2009 Q3
Quarter
2009 Q4
2010 Q1
2010 Q2
Latest data
Source: ONS, quarterly change in GDP (IHYQ), quarterly, seasonally adjusted, UK, Q2 2007-Q3 2011.
Note: The data were revised in Q2 2011 and data for Q3 2011 are not available on the old basis.
1.10 The revised data show much stronger growth in 2007, before the onset of recession, but
then even lower output throughout 2008, a more robust recovery in 2009, and little change in
2010. More importantly for our recommendations, growth since the third quarter of 2010 has
been much weaker than expected. In the year to the third quarter of 2011, GDP grew by
0.5 per cent and growth for the whole of 2011 was expected to be just 0.9 per cent. This is
considerably below the 2 per cent growth expected when we discussed the minimum wage
recommendations in January 2011.
1.11 Figure 1.2 shows that the revised data now suggest that the recession was not as long as
previously thought but it was much deeper. The recession ended in the third rather than the
fourth quarter of 2009. It therefore lasted for five quarters, the same length as the 1980s and
1990s recessions. GDP fell by 7.1 per cent (compared with the 6.4 per cent estimate
available in January 2011). This was a considerably greater loss of output than in either of the
two previous recessions – the 1980s (4.7 per cent) or the 1990s (2.5 per cent).
2010 Q3
2010 Q4
2011 Q1
2011 Q2
2011 Q3
1.5
1.0
0.5
0.0
-0.5
-1.0
-1.5
-2.0
-2.5