Comment: Bleak outlook on wages does little to dampen DWP cheer

Britain may be a prosperous country but its citizens are being impoverished

 As the latest official labour market statistics reveal, more of us may be working – but we’re no better off as incomes stagnate and the cost of living rises. It can only mean more working households will effectively lose citizenship as they become chattels of the DWP’s Universal Credit system…

By Mark Cantrell

Image courtesy of Pixabay

SOME might say it’s all just a matter of perspective, but while officials at the Department of Work & Pensions (DWP) see 2017 ending on a high note, others see a “bleak” continuation of stagnant living standards combined with austerity.

The latest Labour Market figures from the Office for National Statistics (ONS) can certainly be cherry picked according to taste, much like any statistical package, but the finding that wages have continued to decline isn’t one of them. Indeed, it offers a stark reminder that our pay packets aren’t going as far as they used to

In its release this month, covering the period August to October 2017, the ONS revealed that average weekly wages rose in “nominal terms” by 2.5% over the previous year. However, these figures don’t take into account price inflation. When this is taken into consideration, average weekly earnings for employees in Great Britain were found to have fallen by between 0.2% and 0.4% compared with the year before.

That hasn’t deterred the DWP from taking the figures overall as an endorsement of the Government’s controversial – and troubled – Universal Credit, which is currently in the process of replacing “legacy” social security benefits across the country.

“We’re ending the year on a strong note with figures showing the unemployment rate has fallen every month in 2017, and is now at the lowest it’s been in over 40 years,” said minister for employment, Damian Hinds. “Employment is at a near-record high, and there are over three million more people in work now compared to 2010 – that’s more than the population of Greater Manchester.”

Others, however, are less enthusiastic about the ONS figures (or even Universal Credit, for that matter) and see nothing in them to crow about. The general secretary of the Trades Union Congress (TUC), for instance, suggested the figures indicate that this has been a “bleak year for living standards”.

“Real wages have now fallen for the last eight months in a row,” she added, “and working people will be worse off this Christmas than they were a decade ago. Boosting pay packets should be a priority for the Government – not a side issue.”

O’Grady isn’t the only one who finds little reason to share the minister’s festive cheer. The Joseph Rowntree Foundation (JRF) pointed out that people in low-paid sectors of the economy have little reason to rejoice. As the organisation’s analyses into poverty have found, there are some 3.7 million workers struggling to make ends meet as they endure in-work poverty.

“Wages are yet again rising more slowly than prices,” said Ashwin Kumar, the JRF’s chief economist. “Combined with frozen benefits, 2017 has been a year of stress for family finances. But people working in retail and hospitality, who already face low wages, are being hit particularly hard. In real terms, earnings have fallen by 1.4% since last year in these sectors, compared to a 0.4% fall for the average worker.

“Work should provide a route out of poverty, but one in every eight UK workers are finding that this isn’t the case – despite record employment. With rising inflation, many working people are struggling to make ends meet. By investing more in adult training and skills so workers can progress in jobs, and ending the freeze on working age benefits, the Government could make a real difference to families, by helping to close the gap between stagnant wages and rising prices.”

Between May to July and August to October, the number of people in work fell, according to the ONS, but so too did the number of unemployed people. The numbers of people aged 16 to 64 who are economically inactive (that is not working or not seeking or available for work) increased. In terms of those numbers, the ONS reported:

• There were 32.08 million in work. This was down 56,000 on the May to July period, but was up 325,000 on the previous year

• The employment rate for August to October 2017 was 75.1%, lower than in May to July (75.3%) but higher than for the same period of 2016 (74.4%)

• There were 1.43 million people classed as unemployed, that is those not in work but seeking and available for work. This was down by 26,000 from May to July and 182,000 fewer than in 2016

• There were 8.86 million people who were economically inactive, 115,000 more than in May to July, but 56,000 fewer than in the previous year

So more of us are working now, but if employment is not paying enough to make ends meet, then it can do little to alleviate poverty. The day before it released the labour market figures, the ONS revealed that inflation had risen to 3.1% in November, its highest level in almost six years. The rise only adds to the pressure already experienced by those on low incomes, working or otherwise.

“Around 5.5 million people are paid less than the real Living Wage, and are now feeling the squeeze as prices continue to outpace wage growth particularly in the run up to Christmas. Many families are already operating on a shoestring, and struggling to make ends meet will become even harder,” said Katherine Chapman, director of the Living Wage Foundation.

Debbie Abrahams MP, Labour’s shadow work and pensions secretary, added a political element to the occasion, calling the labour market figures and the rise in inflation “further evidence of Tory economic failure”.

“Both employment and real wages are falling while the price of household essentials balloons, leaving millions of people worse off than they were in 2010,” she added. “Eight million people in working households live in poverty, and many will struggle this Christmas as a direct result of this government’s austerity policies.”

To compound matters, the Government remains committed – a few minor tweaks aside – to fully deploying its flagship Universal Credit nationwide. The programme replaces a range of working age benefits into one, covering people who are employed as well as those who are out of work.

In theory, Universal Credit is meant to simplify the benefits system and add substance to the ministerial mantra of making work pay. As Hinds added: “Universal Credit is helping people get into work quicker, and ensuring they get more money in their pockets for every hour they work. Universal Credit supports both the unemployed and the low paid, as people don’t have to end their benefit claim when they find a job. This is especially important at this time of year, when many people take on temporary seasonal work.”

This is very much the standard party line on Universal Credit. However, a growing body of evidence amassed from its staged implementation shows it’s the lucky few for whom these words tally; more often than not, Universal Credit has proved something of a machine for generating poverty and even destitution.

Almost from day one, there have been concerns with Universal Credit, from its underlying ethos, through its design, to its implementation and practice: the notion that people more likely used to weekly wage cycles must be expected to budget for monthly payments instead; the long built-in delay before claimants receive their first payment; what many regard as a draconian and ‘hair trigger’ sanctions regime, that can leave people with no income for months at a time – these are but some of the traits that have caused deep disquiet among those concerned with alleviating poverty.

Last month, for instance, the Child Poverty Action Group (CPAG) released its AusterityGeneration report, decrying the impact of stagnating incomes, a rising cost of living, and the impact of frozen benefits and welfare cuts on families with children. It warned of bleak prospects for an entire generation.

“This report is the closest anyone has come to producing a cumulative impact assessment of a decade of social security cuts on families with children,” said Alison Garnham, CPAG’s chief executive.

“It’s an incredibly detailed piece of work but its basic story is straightforward and shaming: since 2010, rather than investing in our children, Government policy has been creating an Austerity Generation whose childhoods and life chances will be scarred by a decade of political decisions to stop protecting their living standards. This is the choice that’s being made in our names.

“The promises of increased rewards from work made to families with children under the new Universal Credit benefit has been broken. The Universal Credit we see today is not the Universal Credit that was sold to everyone a few years ago. Even after taking into account increases in the minimum wage, rising tax allowances and extra childcare help, working families will be the biggest losers from cuts made to the benefit system.”

In short, Universal Credit overturns the foundational principles of the social security system: far from playing its part in alleviating the worst excesses of poverty – hunger, squalor, insecurity, destitution – it effectively enables them.

Report after study has found that Universal Credit is leading to more people falling behind with their rent; food bank usage rockets as people find they lack the means to feed their families; it generates homelessness.

For all the flaws identified in the Universal Credit system, however, there is a darker interpretation to its maladies than simply poor design and implementation, combined with blinkered ministerial zeal: one might argue that it is – more or less – working as intended.

Where once, the Welfare State provided a social security safety net (however imperfect) that recognised a right of all citizens (at least in theory) to support in times of distress, the process of welfare reform has created something else. As time goes by, Universal Credit looks less like a means of welfare support and more like a punitive mechanism for the State to directly manage a sizeable segment of the UK workforce – a kind of nationalisation of low-income labour.

In a twisted kind of way, then, you might say stagnating incomes is good news for the DWP: it allows the department to extend its reach into the lives of millions of low-income working households. Whereas under the old system, they may have received support from one or more in-work social security benefits, assessed on their means, under Universal Credit they will become subject to a strict conditionality regime.

Under this regime, more working households will effectively find their lives are subject to oversight and micro-management by DWP officials: they’ll be required to seek higher paying jobs, or harass their boss for more hours, or take on a second job, with little regard to their circumstance. Regular visits to the JobCentre will be required, and woe betide those unlucky enough to find it clashes with their shift patterns. Failure to comply with the conditionality rules will mean a sanction – that is they will lose benefit payments.

In effect, Universal Credit treats people in work pretty much the same as it treats those who are unemployed, disabled or sick – with a disregard bordering on contempt. It almost seems tailor-made to browbeat acquiescence to a no-rights labour market of the future, built on precarious, low-income jobs, where there is little carrot but plenty of stick. Bleak indeed. One might almost smell a conspiracy, if our current crop of politicians – architects of Universal Credit included – weren’t so prone to cock-up (Brexit is surely their masterpiece on that score).

Britain needs a pay rise, that’s for sure – but it also needs to reconstitute a properly functioning social security safety net. We need a system that treats recipients as citizens – rather than ‘chattels’ – and one that seeks to alleviate hardship rather than weaponise hunger as a coercive tool.

It’s been done before; we can do it again. It all depends on our perspective – what kind of country do we want to be?

This article was originally published on Medium, 18 December 2017.