National Minimum Wage

National Minimum Wage
16
Figure 1.7: Growth in Productivity per Job and per Hour, UK, 1978-2011
Change on a year earlier (per cent)
6
5
4
3
2
1
0
-1
-2
-3
-4
-5
-6
-7
1980s
recession
1990s
recession
1978 Q3
1979 Q3
1980 Q3
1981 Q3
1982 Q3
1983 Q3
1984 Q3
1985 Q3
1986 Q3
1987 Q3
1988 Q3
1989 Q3
1990 Q3
1991 Q3
1992 Q3
1993 Q3
1994 Q3
1995 Q3
1996 Q3
1997 Q3
1998 Q3
1999 Q3
2000 Q3
2001 Q3
2002 Q3
2003 Q3
2004 Q3
2005 Q3
2006 Q3
2007 Q3
2008 Q3
2009 Q3
2010 Q3
2011 Q3
Quarter
Output per job Output per hour
2008-2009
recession
Source: ONS, annual change in output per job (LNNP) and output per hour (LZVD) for the whole economy, quarterly, seasonally
adjusted, UK, Q3 1978-Q3 2011.
Note: Pink bars indicate recessionary periods.
1.38 In our 2010 Report, we expressed concern that in 2009 productivity had fallen and unit wage
and labour costs had risen sharply. We suggested that this was unsustainable and may lead
to further job losses unless output and productivity rose. This rise occurred in 2010 along
with a fall in unit wage and labour costs. However, these concerns returned as the recovery
in 2011 weakened.
Real Wages
1.39 The most plausible explanation of the labour market’s resilience is the fall in real wages.
In the two previous recessions, inflation had been much higher than it was in the latest
recession but nominal wages had generally more than kept pace. Thus, as shown in Figure
1.8, real wages had generally continued to increase throughout both recessions. In the latest
recession and recovery, pay settlements and earnings have been subdued and nominal wage
growth has been weaker than in previous recessions. Inflation has been much higher than
forecast and higher than these nominal wage increases. This has led to a sustained fall in real
wages that has now lasted for about four years, which is unprecedented in the UK in recent
times.
6
5
4
3
2
1
0
-1
-2
-3
-4
-5
-6
-7