Labour and housing markets breed insecurity

Submitted by AWL on 12 December, 2018 - 10:41 Author: Peter Kenway

When the Minimum Wage was introduced, the bottom scale of local government pay was well above it. Now each time the Minimum Wage is increased, a couple of points at the bottom of the local government pay scales have to be removed because they’re now below that Minimum Wage.

One reason why the decline in local government services is not so noticeable is that there’s been a huge hit to the pay of what was always mostly a low-paid workforce. Productivity figures are usually dubious — on the standard measures, real estate is reckoned to have the highest labour productivity of any sector — but it seems that Britain really does have a long “tail” of low-productivity, low-wage jobs. Some companies in Britain are well up on world scales of productivity, but there are a lot of employers with low productivity and low wages.

As regards the housing market, there is a debate about whether the evidence for an absolute shortage of housing is as secure as it looks (there’s a lot of empty housing). But the big thing is definitely the relative rise of the private rented sector. The private rented sector has always been expensive, but it was a relatively small tenure by the 1990s. Since then, it has exploded.

The young middle class are now much less able to buy into home ownership. They go into the private rented sector, and are not just there for a couple of years when aged 25, but can still be there ten and more years later, bringing up kids etc.

Social housing rents are lower, of course, but they’ve gone up too. The Labour government set that in train. One of the most profound changes made by George Osborne was the Local Housing Allowance, the limit on the housing benefit you could claim. That, and other things like the bedroom tax, have left people deeply exposed.

It is very hard for people to cope with both a flexible labour market and a flexible housing market. You’re on your own all the time. You can’t rely on your job. You can’t rely on your home. You can’t rely on the social security system to support you. The freezing of benefits, the Local Housing Allowance, the roll-out of Universal Credit, the central state abandoning local areas, the staff shortages in the NHS and social care — all those trends are already underway, and with Brexit it is very hard to see anything but a continuation or even reinvigoration of austerity. And probably inflation, with wages and benefits held down.

But suppose we don’t have Brexit — that’s no panacea, either. It might even create economic disruption another way, from a soaring pound. The politics of scapegoating and accusations of betrayal will become even more poisonous either way. There are few areas with any real economic interest in voting for Brexit. But people don’t vote as economists.

• Peter Kenway is director of the New Policy Institute.

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