Connected Research

Union policy research in the 21st century

TUC Recession Report No. 10

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Just about the only bit of catching-up on the blog I will do following my leave is to advise on the publication of the TUC’s 10th Recession Report, this time featuring a discussion on the impact of the recession on pay levels and employer-union negotiations, which came out on 21 August. You can find this via the TUC’s Touchstone blog here.

2.435m people are now out of work on the ILO measure (7.8% of the workforce), with the activity rate dropping to 72.7%, down 0.2 on the previous month and 2.0 on the same period in 2008. This is the lowest figure since July 1997.

The Report identifies that over one million people have now been out of work for more than six months, and more than half a million for more than twelve, as well as that long-term unemployment is likely to rise for some time to come. People out of work do find it increasingly difficult to gain employment as time passes since employers tend to favour people more recently in work as a consequence of concerns over skills obsolescence and personal discipline of those out of work for longer. Easing the long-term unemployed back into work is likely to require specific interventions.

On pay, the Report notes that, in contrast to employer organisations seeking to use the recession to limit pay review prospects, official figures show that average earnings exclusing bonuses are rising by 2.5% – the lowest figure since National Statistics data started to exclude bonuses from earnings figures, but representing a growth in real incomes given where inflation data sits. Settlement data also indicates a median pay settlement figure of 2% – also representing the point at which rises in prices are no longer outstripping rises in income. Removing pay freezes from the data indicates a median pay settlement figure (i.e. amongst employer who aren’t freezing pay) of 2.5%.

The TUC correctly points out the importance of maintaining income levels during a recession:

– cutting earnings growth unnecessarily has an impact on worker morale and productivity

– pay cuts and freezes have a negative impact on economic demand, thus prolonging the recession

– in individual companies, pay freezes may be the right way to go to ameliorate the impact on jobs – but a uniform approach is likely to be disastrous for the economy as well as being unfair to employees.

Settlement data would indicate that, with pay freezes remaining in the minority of settlements, the majority of employers would agree.

Furthermore, with UK unemployment continuing to rise steeply, the examples of other European countries which have invested in short-time working schemes remain relevant. Despite the jobs that have already been lost in this recession, it might not be too late to introduce similar schemes in this country, as Nicola Smith argued also on Touchstone earlier this year, as a means of saving jobs lost unnecessarily as a result of short-term conditions.

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Written by Calvin

07/09/2009 at 4:52 pm

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