A few facts about the UK economy

I'm on a panel at the Big Tent Ideas Festival today discussing this report by the IPPR which proposes 'fundamental reform' to the UK economy. In my view, the reforms are not particularly fundamental. Most of them involve setting targets, stating aspirations and creating more quangos. Most of it could have been written by Theresa May.

The report starts from several false premises and there are bound to be disagreements about the facts that won't be resolved in front of a live audience so I am posting some evidence here so I can point people towards it if they're interested.

'Most people are no better off than a decade ago' (IPPR, p. 6)

Not true. Provisional data from the ONS published last month shows that median household disposable income is well above the level of 2009 and has been for some time.

The ONS's last full (ie. not provisional) release showed that every quintile has a bigger income than it did in 2008/09, with the biggest gains going to the bottom (poorest) quintile.

I think the IPPR has confused wages with incomes here. At the last count, median wages were still £4 a week lower than their pre-crash peak, but this does not imply that 'most people are no better off'. The labour market has expanded greatly in the last decade. The median wage earner is not the same person as he was then, as I explain in this post and as the ONS explains here.

'The UK is the fifth most unequal country in Europe in terms of income...' (IPPR p. 6)

No, it isn't (original figures from here).

'...while inequality of wealth is even greater'. (IPPR p. 6)

This is true but misleading. Wealth inequality is greater than income inequality everywhere. But the UK is less unequal in this respect than most comparable countries.

'Many more people work in insecure jobs than in the past, with almost a million people on zero-hours contracts...' (IPPR p. 6)

Between 2012 and 2013, there was a huge rise in the number of people who said they were on a zero-hours contract. In fact, it was so huge that it could only be a methodological issue. Sure enough, it coincided with Ed Miliband and others getting the term 'zero-hours contract' into popular use. I have written about this before...

‘Zero-hours contract’ is a relatively new term for what used to be called casual labour. It was almost never used by the media before 2012. And so, although the number of people who said they were in these contracts more than doubled between 2012 and 2013, the ONS concludes that this ‘appeared to be due mainly to increased recognition and awareness of “zero-hours contracts”’. The fact that the trend flattens out after 2016 suggests that the term has now become universally understood.

.. Moreover, the majority of zero-hour contract workers seem to be satisfied with the hours they are given and there is evidence that they are more satisfied with their work-life balance than those on full-time contracts.

The shortcomings of the data make it difficult to establish whether there are more people in casual work than in the past, but, as the ONS explained on BBC More or Less earlier this year (from 9 minutes), the number of people working only a few hours per week has declined.

Share of GDP going to labour

The share of GDP going to labour has fallen since the 1970s, as the TUC often says. The IPPR says the share of wages in national income has dropped 'from almost 70 per cent in the 1970s to around 55 per cent now' (p. 11).

But if you look at the data, it is clear that it only rose to 'nearly 70 per cent' during an unusual period in the mid-70s when the economy was in crisis, inflation was at 20 per cent and GDP was low, so it is not the most representative era to compare it to.

Nevertheless, GDP share to labour has fallen. The IPPR blames this on the lack of bargaining power of trade unions, but the same decline occurred in more heavily unionised countries and to a greater extent. Indeed, the share of GDP going to labour has declined more in other countries than it has in the UK.

The IPPR don't claim that income inequality is rising or has been rising, but someone on the panel might. For the record, it isn't and hasn't - not for thirty years.

Nor do the IPPR claim that the UK's low rate of unemployment is due to people who hardly work being classified as employed, but it is a common misconception so it might come up. For the record, it isn't true.