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National politics

#CostofCameron 4: Prices up faster than wages

Prices and wages graphicThis busy little graph is a swizz two times over. First swizz is that it compares wages with RPI which is the largest measure of inflation you can find. So Labour overstate their case. The second swizz is that it leaves out what happened to the left of this picture which only starts in May 2010.

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I chose this graph from JP Morgan Asset Management because it is nice and clear and puts Labour’s graphic into context. This picture makes it clear that wage growth fell below inflation in mid-2009 when the lines crossed but wage growth turned down markedly in early 2008. What happened then? Oh yes! Labour’s 7.2% single dip recession.

Wage growth in the UK had already been very muted in the UK throughout the noughties due, in most people’s minds, to the availability of cheap, skilled Labour from the A8 countries, notably Poland, who were entitled to work here from 1st May 2004. Labour’s “spectacular mistake” as described by Labour’s Jack Straw. The recession knocked wage growth back even lower and it hasn’t recovered yet.