Income distribution

A couple of weeks back I went to a debate about the legacy of the miners’ strike. There was a lot of shouting at Edwina Currie, being the only Conservative there, and a member of the government at the time. There was an element of nostalgia too, with mining jobs being romanticised a bit too much (George Galloway and Ken Loach were there too). However, the fact remains that these dirty and dangerous jobs seem to pay better than the service sector jobs that have replaced them.

One of the more interesting claims was that British workers have really good earnings. Edwina pulled out the ‘creative industries’ argument, like Charlie Leadbeater’s Living on Thin Air, effectively saying we could all be earning good money designing computer games. It is of course true that the average British wage is high, and the creative industries is profitable. But for the worker at the bottom of the pile, it’s the distribution that counts.

For example, if a company makes £1m p.a., after costs, and shares it between 50 workers equally, then they all get £20k each. But if they decide to ‘award’ the 4 managers with £100k salaries, then the remaining 46 only get £13k each. The mean wage in each is the same, so in any analysis we should examine the distribution, not just the minimum, maximum and means.

Thus, on the one hand the government can tell its domestic audience that we’ve never had it so good, and that we’re paid really well. This was Edwina Currie’s line. But when its audience is overseas investment, a different story is told:

‘The UK has a competitive salary structure in the service sector [i.e. cheap], particularly when compared to countries such as Germany, Ireland,Spain, Sweden and Switzerland… hourly compensation costs for production workers in the UK are also lower than in many other countries…’ (UK Invest)

The same document also shows that the UK has the reputation of the most flexible labour market [i.e. best for business, not workers], except for China:

UK has most flexible labour market

But internally, businesses give the impression of being hampered by red tape, unions with too much power, and the minimum wage. The CBI originally said the minimum wage would reduce the number of jobs, then each time there’s due to be a raise they say the same thing.

Perhaps at GDP per head, the UK is doing well, but we also have the most unequal wage structure outside the US, so people can still be badly paid here.

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Filed under bad social science, government, Politicians, Statistics and simplicity

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