I was not surprised but still pretty appalled at UK worker's average pay, and you may be even more so if you knew that this considers FULL TIME workers. Thus it is biased against including women, youth and over 60 year olds. That figure then drags down the national current average from about £25k to then £19k according to the governments own sources if you bother to look deeper into their statistical publication.
It is an appalling figure because it has not risen in particular over many years, and non unionised service and business jobs are actually the cause: highly skilled oil, defence, nuclear, health and other engineering professions have enjoyed above inflation wage rises over the last twenty years as a whole because their skills are rarer but also because they know they are more inclined to negotiate themselves directly or via national bodies such as with GP's whose salary leapt from around £36k in 1992 to over £110K by 2002. Newly qualified chemical engineers for example more than doubled their worth in the same period.
Take just for example Norway, where the average wage is around £49,000 pounds and also most all professions get a settlement on inflation linked pay rises each year. Living costs are often quoted as being ridiculously high in Norway, but in fact house prices are on a lower gearing : circa £290k which is only six times income single and not ten as in the UK, but it is more likely to reflect joint incomes of around 1.6 average I would guess too. Coupled to women being more active in full time or better paid work in Norway, then you actually have more income left over to spend in the economy in general, and that discretionary income is highly visible in the rather lush lifestyle and material goods Norwegians are now used to.
The average house price in the UK was about £260k - so for an average two up, two down you are on ten times single income or actually more likely to be around six or seven times with the average working household income being £40K- but what is that based on? Does it too exclude unemployed, disabled, chronically ill?
The daily express last year published an actual across the board income including pensioners or only £16K as the average household income in the UK, which shows the real poverty gap between those who have a double income and those who do not, and are probably not on the property ladder.
Every so often first time buyers are locked out of the market for a while due to the capital multiplier of there being various higher levels of demand from people wanting a three down three up or for another example, those wanting to have such a large capital gain upon sale of said town house aged 65, that they can then buy said Cornish Cottage outright.
Now this is in fact not unfair - it should create an adjustment in the market - firstly rental becomes more lucrative as it is now, but then a glut of rental properties can appear: companies and individuals then who have levered loans on eventual ROI from sale, and use rental income to cover only interest and some costs, expose themselves to higher risk and more are forced to sell at a lower than expected price as the whole housing market slows. Certainly though, this is the long term trend with the capital investors who own places like the former Olympic village in London rubbing their hands and rubbing it into workers that you will have no choice but to rent because you will neither have the salary to buy, nor have the permanent position to want to lay down roots.
The issue with the UK is the elephant in the living room: capital owns too much of the land and makes too much money out of subsidised farming in the countryside which could be housing, or they make too much lease income to want to sell in the cities or to want to inject more land or regeneration to the market. Councils create two further market bottle necks, firstly holding onto public housing stock due to their obligations to house the homeless and keep low paid key workers available- as an aside to this part of the equation, you can also say that council house sales are often inefficient because modern higher density housing could have been built where Mr Smug the dustman now resides. The other thing councils do is they restrict the market with the planning permission mechanisms and this is open to bureaucratic sloth, administrative barriers to entry for would-be market entrants, and outright corruption.
So the UK now follows the Scandinavian model of socialist home ownership in underwriting loans to bridge the deposit gap for first time buyers. This also mirrors the sub prime house of cards of course, which it has done in Norway even where part of most new loans with the first time buyer loan is a higher interest loan.
All of this is a recipe for disaster for the UK because another boom in house prices is being fueled and that means more money from capital and workers gets locked up in that part of the economy, rather than being invested in value multiplication in industry. Where "high risk" 100% loosely secured loans for machine tools or high tech' facilities are unpopular, wildly risky loaning to the domestic housing market is seen as a damn good bet for ROI. Further to this recipe for disaster has been then the socialist bail outs post 2008, for failed and corrupt or anarchic banks, which has only worked as to show clearly to investors that they can take such unreasonable risks throughout the whole structure, from home owner to mega capitalist creditor to the banks. The 'nanny state' will effectively pay their casino bill when they loose.
At the bottom of the problem is that land (real estate) plot prices are too high in respect of eventual sale value which makes some developments which are riskier for the builder/developer non starters. This is what is happening in Norway, where plot plus desired building price ends up higher than that the market can bare. The other side of the problem, as in Norway and the UK is the metropolitanisation of national economies based on the global economy: finance nodes in the west, such as London, or trading nodes for goods such as Oslo which is both, or manufacturing nodes like Shanghai area. These suck in workers at a prodigious rate, promising a pathway lined with gold, but these days the vast majority will probably never afford to buy housing unless they inherit money.
The South East of England in particular does not want to loose this love affair with the domestic and rental property investment multiplier because it is seen as the way to get rich fairly quickly. Investing in "metal bashing", as the city traders patronisingly call mechanical engineering, so profitable in Germany, Sweden and Norway amongst other countries, is not of interest.
However the regions could plan to free up land and address the issue of plot prices and desirable location. Then they would run into all sorts of issues, so it is best that regional meta democracy or even central government do something legislatively or tax incentively to get things cheaper at that part of the cost of new housing.
Faced with 30 years of promise from the right wing in the UK, while in fact wages for many in business services for example, have been practically stagnant or erroded by inflation over the last 20 years, all means that my generation of baby boomer's own babies are going to be the first to experience a decline in material wealth and other living standards, with a probable decline in real terms of the value of pensions to those in permanent work, and worse for those who are in the "dynamic, nimble labour market" who never will have a notable private pension.
Many right wing commentators said the minimum wage was unworkable because it would just inject inflationary pressure into the economy and then the rise in pay would be erroded by that. If you exclude the bungled privatised utilities, and transport ie rail, then inflation has been at a low ebb through the introduction of the wage. The wage did mean fewer people on benefits until the 2008 crash, and more tax payers and more full time workers. I think the same would be true of raising other sector's wages in line with at least inflation and some degree of productivity over and above that. This would then need to be linked to a freeing up of land for development of housing, and that is likely to be a national government lead initiative.
But governments I hear you say, should not interfere with this market. Well the government does interfere with it by not freeing up enough land it owns nationally or locally, and by allowing for democratic controls on the excesses of architectural and environmental vandalism by blocks of flats. Also what about High Speed 2? That is a mechanism to deliver more people to London such that they can commute from the North, and thus deliver house price inflation to the cities on the route.
(In fact it may prove to be too expensive for daily commuting and like the channel tunnel, an under used facility by passengers , whereas unlike the "Chunnel" it will not carry freight. The cost of HS2 would be better spent in creating a warwick-oxfordshire-bucks-berks-chunnel freight line at a vastly smaller sum utilising some existing track bed and the Thame route which is largely there to be bought cheap. Then using a fraction of the many billions budgeted for HS2 to create new towns outside London, to free up land outside the other major cities for new villages and small towns and to facilitate satellite offices for the stock market and governmental departments outside London.)
Governance has failed to address several huge problems in the economy because they only have four or now five years to do anything, and a rising house price index is a historical vote winner. Without enough supply to satisfy demand there will be price rises, and collusion to this is rank at all levels of governance in the UK I would contest, such a big apple cart as it is. However this is now socially engineering society- people have kids later, people will be poorer when they retire, people will have even more working income locked into mortgage repayments, interest rate rises will stifle consumer confidence. Most of all more people will be excluded from the house market all their working lives. The result in an aging demographic with fewer children is a worse ticking time bomb than the current baby boomer retiral wave.
The current wave of baby boomed turned pensioners is great- they have high disposable income relatively, they will be a bit healthier too as well as wealthier, and they will free up an immense number of managerial, skilled and semi- skilled positions in the job market, not to mention allowing the next generation to run family enterprises further with new energy. Eventually when they die too, or become decrepit in about 20 years time as they enter their eighties and nineties, there will be a huge number of properties on the market or inherited which will create a new dynamic for the market. The average age of first purchase has risen to 37 now, that being no coincidence a very near figure to what must be the mid to late baby boomers offspring born in the 1980s, and then soon their grand children. It does not take a genius to know that this means that home ownership then is also aging and a wave that will crash in 20 years time from the early post war baby boomer demise, when the average buyer now is looking at having about ten to twelve years in gainful employment.
However that "correction" in the market, when previous capital ownership is freed up to provide a larger supply side to the housing economy, is a long way off and may in part be taken up by skilled immigrants.
Back to wages then, and of course wages should be related to productivity but that is not always the case in both sides: some people are very underpaid for the utility they provide the economy, some are overpaid due to the rarity of their skills or propensity and power to negotiate wage rises. Productivity relates to skills for any western economy and that means that we need more skills across the economy to raise productivity. We more than anything in the UK need to have skills in prioritising, knowing what value can be set or rather extorted on a task, product or job (elevating gross margins), and quality management such that what we sell or do is of higher reliability to the buyer.
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