The Donald divided the indivisible nation. Brexit split the UK in two. Since June this year I’ve heard many newspapers and journalists claim that our country is more divided than ever. But what is driving this divide? What has created the swell of protest voters and the creation of a disaffected class within our country? Could some of the divisions be linked back to the amount you earn?
A few weeks ago the Annual Survey of Hours and Earnings for 2016 was released, detailing how much people earn in the UK. The newspapers were awash with claims that salaries had increased year on year, and that the lowest paid saw the largest increase in earnings. But alongside “correlation does not imply causation” another favourite adage of the number fiddler is “one swallow does not a summer make”. In other words, a single instance of an event doesn’t mean there’s a wider trend. This made me determined to look at the bigger picture.
With this in mind, I set out to gather all the data I could on wages in the UK going back as far as I could to see if this was the driving force behind the divide in our country. After a bit of digging, I realised this would mean nights of transferring data from sheets of PDFs into Excel, all the way back to 1970. Yes, I do this for fun.
The newspapers came up with 2 main claims:
- Wages have increased by 2% year on year, the biggest rise since the crash in 2007
- The lowest paid (those in the bottom few percent of earners) saw the biggest increase in wages, all down to the living wage
Both of these statements are true. However, I decided to look at them a different way.
- Have wages reached 2006 levels again and could earnings in London and the South East be distorting the picture?
- Have wages for those in ‘manual’ roles increased since 1970, and how does that compare to executive pay?
- What’s going on with the gender pay gap?
For all averages of wages in the UK I have used the median rather than the mean. The median gives you a true ‘middle’ wage, a more accurate reading of what you and I earn, whereas the mean is skewed by very high and very low earnings.
Have wages reached 2006 levels again and could earnings in London and the South East be distorting the picture?
Wages are still depressed after the 2007 crash. Weekly wages in 2006 for those in full time work after adjusting for inflation, were at £559.80, whereas the median wage is now £538.70 across the UK, a fall of 3.8% in real terms. Taking the longer view, from 1971 to date, salaries have increased in real terms, from £84.55 a week. The fastest rises were in the early 70s through to the early 1990s, where wages increased 3.5 times.
This is fantastic news, salaries on the up and up. But I got to thinking – would any of this be affected by the high salaries in the South East and London? And was George Osborne’s favourite Northern Powerhouse being left behind?
Things were pretty balanced in 1971. After adjusting for inflation, in 1971 Londoners earned £12.03 more a week than average UK salary. The West Midlands earned £5 more, and the South East took home £1 more.
Full time workers in the rest of the UK (North East, North West, Yorkshire, the East Midlands, the East, the South West, Wales, and Scotland) earned on average £4 less the median wage per week, but not a great distance away.
However in 2016, the entire country is lagging further behind London and the South East. Londoners on average earn £132 more than the median UK weekly salary, and people in the South East earn £27 more. The rest of the country on average earns £33 less than the UK median, with people in the North East earning £44 less, and those in the East Midlands earning £55 less.
Have wages for those in ‘manual’ roles increased since 1970, and how does that compare to executive pay?
People working in ‘manual’ roles, or what is now called ‘elementary occupations’, fall into the following roles according to the ONS. Farm workers, labourers, construction, refuse collectors, postal workers, porters, car park attendants, window cleaners and cleaners. There are 42 roles listed in all, and there are 2.9 million people employed in these roles the 4th largest group (in 2016), so a significant part of our workforce.
This category of worker has seen an increase in wages since 1970 in real terms. However over time this has moved further and further from the UK median. In 1971 these workers earned £6 less than the median. In 2016, they earn £182 less than the median.
In the same period, executives (what are described as managers, directors, and senior officials, and also a significant part of the workforce, 2.6 million people and the 5th largest group in 2016) have seen whopping increases. In 1971 they earned just £51 more than the average, after adjusting for inflation. In 2016, they earn £258 more than the average. This means their salaries have increased 4 times in that period. However manual roles have only seen an increase of 2.5 times.
The bulk of the increase for these executives happened in the 1980s, with salaries increasing by 48% from 1986 to 1991. In the same period, manual roles saw an increase of just 26%.
The real surprise came from what has been happening since 1996. Wages in manual roles have been falling in real terms. In 1996 you could expect to earn £409 a week. In 2016, that figure is more like £356, a reduction in real terms of 14.8%. Over the same period, executives saw a 13.7% increase in their real terms salaries from £701 a week to £797 a week.
What’s going on with the gender pay gap?
The gender pay gap has widened since 1971. In 1971 a woman in full time work could expect to be paid £48 less a week than a man, whereas in 2016, that gap has widened to £97. The peak of the gap was in the 1990s when women could expect to be paid a huge £135 less a week than a man.
But interestingly women’s salaries are rising faster than men’s. Since 1971 women’s salaries have increased almost 7 times, whereas men’s have increased by 4 times. More recently, looking at the difference between 2006 (before the economic crash) and 2016, men’s salaries have fallen by 5% whereas women have seen a lesser 0.7% fall. Over the last 5 years between 2011 and 2016, women’s salaries have risen by 1.6%, whereas men’s have fallen by 0.1%.
However, the gender pay gap is still more of a gender pay chasm, with women in full time work earning 9.4% less than their male counterparts. In addition, if you include women in both full time and part time work, that gap increases to an incredible 18.1%.
Overall, we are all being paid less than we were before the crash. A 2% increase in 2016 is significant, however is not quite as amazing and world-changing as the newspapers made out, with substantial gaps elsewhere in our highest and lowest paid workers. A link can’t be made explicitly between gaps in pay and people voting to leave the EU. Nevertheless, a divide in pay such as this, with the highest paid earning more than ever, could underpin a feeling of disenfranchisement and marginalisation among those seeing their pay falling.