Tuesday, June 14, 2011

Pay freeze hits the low paid hardest - official

Later today, the Institute for Fiscal Studies (http://www.ifs.org.uk/publications) will publish research which demonstrates how inflation is hitting the poor hardest (http://m.guardian.co.uk/business/2011/jun/14/poor-hit-higher-rate-inflation-than-rich?cat=business&type=article).



Although price inflation is measured on the basis of composite price indices which reflect an "average" pattern of household expenditure, the spending patterns of real people vary with household income.



Broadly speaking, the lower the income of a household the greater the proportion of that income spent on food and fuel, two categories of goods which have seen prices rising way above average "inflation" in recent years.



For those of us now well into a pay freeze this means that - whilst all of us are worse off in "real terms" (as our frozen salary can purchase fewer goods and services with each passing year) this hit to living standards is felt hardest by the lowest paid.



The difference is significant. According to the IFS, someone whose frozen salary placed them in the top fifth of households by income (a Chief Executive say) has seen their standard of living fall by 2.7% annually over the period 2008-2010, whereas someone whose frozen pay leaves them in the lowest fifth has seen their standard of living fall by 4.3% annually over the same period (so that their, already much lower, standard of living has been more than half again as fast).



Right now we need to prepare to fight for our pensions - not least because the figures above underline the likelihood of a crippling exodus of the lower paid from pension schemes if the Government achieves its twin aims of reducing their value and increasing their cost.



However - the pent up pressure of a pay freeze will also grow, and the time is coming when we shall mobilise our members against this. The IFS research helps to make the case, I would suggest, for a flat rate claim that does the most to help the lowest paid, who are being hardest hit by the freeze.

Sent using BlackBerry® from Orange

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