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Low pay, poor prospects and debt - welcome to contemporary Britain

Some might suggest that the bankers' bonus controversy is a storm in a - very expensive - teacup that has come in handy for George Osborne whose stock is rising on the back of good economic data

It's been a strange week for news what with departure of David Moyes from Manchester United and controversy caused by Chancellor George Osborne putting a block on the size of bonuses that can be paid to bankers at Royal Bank of Scotland.

There will probably be little sympathy for Moyes who was unfortunate to inherit a football club that many believed to have over-performed under Sir Alex Ferguson under the Glazers who, we should remember, took over the club by incurring multi-million pound debt from US hedge funds.

Manchester United's phenomenal success in recent years ensured that this debt could be serviced.

Given the need to continue to pay off the debt Moyes failure to at least secure Champions' League football next year meant that he had to go to be replaced by, it is rumoured, a manager who will guarantee success.

However, in football success can only be achieved by securing the best players in the world.

As even those who profess absolutely no interest in football will be aware, such players don't come cheap.

And it is the cost of securing the services of the best 'players' that is at the heart of the furore about bankers' bonuses.

Without the ability to pay bonuses of 200% of salaries to merchant bankers executives at Royal Bank of Scotland claim that it will lose its best staff to competitors and be unable to make the sort of profit that will ensure it can wipe out the £8.3 billion loss made last year and allow the 81% owned by us the taxpayer to be sold back to private investors.

Some might suggest that the bankers' bonus controversy is a storm in a - very expensive - teacup that has come in handy for George Osborne whose stock is rising on the back of good economic data.

It is worth acknowledging the fact that average wages in high street banks in this country, roughly £30,000.

Average wages in the UK are approximately £26,500. Thus if the multimillion pound salaries earned by 'superstar' bankers was stripped out it would probably mean that the average salaries earned by employees of banks would be much closer to the national average.

However, as is becoming more apparent, even earning the average wage is becoming harder for a lot of workers - especially the young entering the job market - who increasingly find that they what they are offered is not full-time or, if it is, will be on terms and conditions that make getting out of poverty extremely difficult.

Whilst employers in both the public and private sector may argue that they must be cautious whilst we are still recovering from the global crisis caused by, let us not forget, appalling investment decisions by the banks we had to bail out and now want to be allowed to pay football player-type salaries and bonuses.

In the early part of the last decade banks could not lend fast enough to fund the equity investors and hedge funds that were producing staggering returns and making those 'taking risk' fortunes.

The fact that they were using others' money was ignored; this was acceptable in order that buccaneer capitalists could produce the results that would make us all better off.

Let's remember that this is the basis of annuities that are paid to many pensioners not lucky to have one that is calculated on final salary.

Writing in  The Observer  social commentator Will Hutton pointed out that Adair Turner presented a lecture at Cass Business School recently in which he argued that our banks have become 'engine[s] for credit leverage and property price inflation'.

Hutton contends that in the past couple of decades we developed an obsession in rapidly rising share and property prices and largely forgot the importance of investment in creating real long-term value through innovation and creativity.

The coalition government is claiming that its policies have ensured we are recovering from the worst recession since the 1930s.

One of the things that it is using as a measure of this recovery is job creation.

However, whilst this undoubtedly better than no jobs, the reality is that the vast majority of these new jobs are low-paid.

According to data produced by the Office for National Statistics, four in five of jobs that are meant to herald economic recovery are paid a salary that is some £10,000 under the national average of £26,500.

And many are paid the £6.31 hourly minimum rate which for a 40-hour week will produce just over £13,000.

Even securing full-time employment is becoming harder as many are forced to become self-employed, work part-time on zero-hour contracts. Whilst such practices are seen as underpinning economic recovery their use has given rise to the phenomenon termed 'underemployment'.

The thinktank the Resolution Foundation carried out a survey that found that some half a million people who are self-employed are not doing so out of choice and would prefer a full-time contract with prospects.

Moreover, the Resolution Foundation believe that the median wage for those who are self-employed is about £12,000 which is less than the £13,000 noted is paid the hourly minimum rate.

As some commentators are now asking, whatever we may be told about the current state of the recovery of the economy, if so many of the new jobs are paid so little how will the next generation ever afford to aspire to own their homes?

Indeed, whatever we hear about pay matching inflation the price of housing is once again rising at a far faster rate and reminiscent of previous booms.

This is good for speculative investors and assists owner-occupiers to feel wealthier.

George Osborne will presumably have few worries.

The trouble is there is an immutable economic 'law' that states that every boom must end; all-too-frequently in a bust.

We know only too well that this leaves us all worse off.

A report to be published later this week by the Joseph Rowntree Foundation will show that low pay is creating a sense of hopelessness in many parts of society.

This report echoes fears raised by Raymond Torres of the International Labour Organisation and the Social Mobility and Child Poverty Commission set up by this Coalition and chaired by Alan Milburn that poverty and inequality in this country is becoming endemic even in homes where both parents are working.

This sense of a divided society is presented in a recently published book  Hard Times: The Divisive Toll of Economic Slump  (Yale University Press) by Tom Clark and Anthony Heath which, among other things, shows that since the financial crash we are carrying out less volunteering; especially in the areas that need it most where poverty is greatest.

Hard Times  also shows that unemployment creates a wake of consequences in that those without qualifications become most disadvantaged and that in communities where traditional low-skilled jobs disappear there is a vortex effect that drains away the belief that studying can improve life prospects. As the authors show, the move towards temporary low-paid jobs will do nothing to reduce hopelessness.

However, another recently published book shows that the loss of low and semi-skilled jobs in manufacturing jobs that has so blighted certain communities may soon be experienced by wider society currently employed in 'white-collar' knowledge-based jobs.

In  The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies  (W.W. Norton and Company) MIT professors Erik Brynjolfsson and Andrew McAfee suggest that the next phases of massive computing power may allow jobs that can only be presently carried out by human beings using cognition to be replaced.

Though employing fewer people in white-collar professions may seem fine to investors if the result is higher returns but it presents an awful prospect for future generations; especially given that so many jobs have been lost in other sectors.

After all, we need people in work to ensure continued consumption; ideally in well-paid careers with the ability to advance. What Brynjolfsson and McAfee are suggesting will simply create an even wider spread of poverty and hopelessness.

And last week there was an article in  The New York Times  which described how the American middle class which have always been the exemplar of the belief that hard work will allow anyone with sufficient dedication to achieve in a society that, compared to Britain, was less class obsessed, increasingly believe that it is possible to become successful.

This is significant because we have been led to believe that we can replicate America in so many ways; not the least of which was that incurring huge debt as a student was perfectly acceptable as this was an investment in the future.

There are many now suggesting that higher tuition fees will not produce the economic benefit that was once suggested.

What does seem clear is that we need to rethink what we really do require in terms of skills in the next generation and to invest in educating accordingly.

If the economic recovery means we all become wealthier then nobody will complain.

However, if it continues the shift in wealth distribution to those who have most away from those who have least we will end up with a society that is even more polarised and divided than it is already.

This will only exacerbate social divisions and surely not be in anyone's interest apart from the elite who currently benefit from a system that pretty much exploits workers.

Ultimately, though, as many critics argue, we need a better system that creates genuine opportunity and one that has better prospects than the low pay, poor prospects and debt currently on offer.

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