Weakening of trade unions behind pay stagnation, says Bank of England’s Chief Economist

Andrew Haldane, Chief Economist at the Bank of England, has pointed to the decline in trade union power as a key factor in the last ten years of real wage stagnation, alongside the rise of insecure work, low productivity and automation.

Speaking to trade unions and business earlier this week, he said: "Sectors of the UK economy with higher levels of unionisation have seen smaller falls in their labour shares. Over the past few decades, a sector like administration and support activities with under 10% unionisation rates has seen its labour share decline, while a sector like education with a unionisation rate close to 50% has seen its labour share rise."

The last ten years have been historically unusual, he added, in that employment has risen but pay has not followed.

Indeed, workers are feeling the pinch across the UK and some of those in the most insecure types of jobs are taking a stand.


Hat tip IER

"The world must have gone mad" Help to Buy You Negative Equity

Steve Hilditch from Red Brick New Year's message yesterday on the danger of this largely "Artificial and temporary recovery based on property inflation" is a welcome warning.

The Government flagship "Help to Buy" programme is helping to overheat the already unaffordable property market in London and the South East and push prices even higher.

Even that well known lefty organisation, the Institute of Directors thought that the introduction of "Help to Buy" meant "The world must have gone mad". 

What on earth is going to happen when interest rates rise? Which they will as surely as winter follows summer.

BBC report "The number of people using more than half their disposable income to repay debt could rise from 600,000 to a 1.1 million by 2018 if interest rates rise to 3%, said the Resolution Foundation.
If rates hit 5%, two million households would face huge repayments, it said".

If (when) rates increase people will not be able to afford their payments and they will default causing house prices to crash. 

Bank of England interest rates are currently at a historic low of 0.5%. The governor has indicated that he will increase rates when unemployment is below 7%. Unemployment is now 7.4%.

I can remember the housing crash of the early 1990s when the value of my property halved. It took years and years before it came out of negative equity.  Remember in 1991 interest rates were 15%!  15% is unlikely now but 5% is a long term trend. If you buy a property think whether your could afford it if rates doubled.

What this Government is doing is helping vulnerable first time buyers into negative equity. All for the sake of a boost to their election chances in 2015. 

Hat tip picture Henry Pryor

Bank of England investigates itself and finds its "Not Guilty" over QE

Well, that's okay then. Never mind perfectly sound pension schemes are closing left, right and centre. The Bank of England has looked into whether its ongoing policy of Quantitative Easing (QE) has any negative effects and has concluded the good outweighs the bad.

Apparently the fact that QE has benefited the rich (top 5%) the most isn't of concern to this Coalition cabinet of millionaires either.  I do wonder why?

The cut in gilts yields due to QE is helping to make many private sector DB pension schemes seem unaffordable and adding to the pressure for them to close. It increases the so called "deficits" which due to current abnormal 200 year market low conditions are already pretty meaningless. 

This has nothing to do with poor investment returns or increases in life expectancy. This is solely down to a discredited and outdated accountancy measure ("mark to market") which the Bank of England is aware of but does nothing about and while the Government has promised not to idly stand by and watch good pension schemes go to the wall, so far, it has done nothing either.    

National Association of Pension Funds Local Authority Conference 2012

This was very informative and well organised conference taking place during an absolutely crucial time for the future of the local government pensions scheme (LGPS). I was there as a Councillor and member of the Borough LGPS Investment and Accounts committee.

I did “twitter” (in my case a very apt term?) during the conference (see hash tag @grayee and #napf).
The NAPF had amongst many other speakers the minster responsible for the LGPS, Bob Neill MP, the Deputy Governor of the Bank of England, Charlie Bean; the Chair of the Local Government Association, Sir Merrick Cockell (who in a Q&A I referred to as “Michael”) and from the unions, GMB national secretary Brian Strutton.

The Chair of the NAPF is Joanne Segers. By coincidence the first ever trade union pension course I ever went on was delivered by her father, TUC tutor Terry Segers. Proper old school ex-fire brigade union.

Considering the number of forthright and opinionated individuals present at the conference, the Q&A sessions were quite quiet, which gave a opportunity to a certain gobby part time politician and union rep to somewhat hog the floor during questions.

Key issues to me from the speeches and seminars were:- how Housing associations are “gagging to build new homes” which if happened could help us get out of recession like it did in 1930’s; the real problem in pensions is not in the public sector but that private sector pensions were destroyed by various incompetents; if you truly want diversity on company boards why not have employee reps on them? Are fund advisers really interested in good governance and making company boards accountable? It’s a “no brainer that LGPS should share services" (if so why not just merge?); in the current LGPS if you earn £150k per year you pay less in percentage terms net than if you earn £15k pa (this is wrong, wrong, wrong); What is the collective term for Actuaries? Answer “An invoice”; the new proposed £2 billion infrastructure fund and LGPS governance (a possible national Local Government Pensions Board?)

There was clearly an expectation by speakers that the future of the LGPS negotiations would have been finalised by now. But there is some last minute hic-cups. This is immensely frustrating but I suppose they do want to make sure, as far as possible, that there is no misunderstanding or ambiguities about the “agreement”. The ultra left trade union cry babies (the so called 0.8%ers) are of course still weeping tears at the prospect of no more strike chasing to bring about the revolution but we should have the final offer very soon.

It was good to see at the final session that the conference applauded DCLG pensions lead, Terry Crossley, who is retiring from the civil service. I have crossed swords (politely) with Terry for the past 10 years or so over beneficiary representation on the LGPS. I wish him well in his retirement and told him that if a deal is reached on a new look LGPS then he should have a new part time job and go out and sell the model to the private sector who are in desperate need of affordable and sustainable defined benefit pension schemes.