How can we understand the current cost of living crisis in perspective when talking to Bectu members about their wages?
One way would be to look at it over a few years. In the past few days, coincidentally, I’ve had two different requests for advice from people who last increased their rates in Autumn 2019. Because a lot of things stagnated over the course of the pandemic, it’s an interesting scenario to look at.
So imagine that you were paid £1000 to do a job in October 2019, and you were offered the chance to do it again today (29 months later). Using this inflation calculator, you would need to charge
- £1,102 if you wanted your pay to keep pace with RPI inflation. The cost of goods and services as measured by RPI has grown by 10.2% over that period. Someone who was giving themselves an annual pay increase would have needed to increase their wages by an average of 4.3% each year during that period.
- £1,067 – a 6.7% increase over those 29 months – if you were doing the same calculation using CPI. Someone who was giving themselves an annual pay increase during that period to keep pace with CPI inflation would have needed to increase their wages by an average of 2.73% over that period.
Inflation is also now being forecast to be here for a while – see the current Treasury forecasts document here [pdf]. However, inflation rates aren’t the only factors in play when thinking about the cost of living.
Yesterday’s inflation figures recorded CPI at 6.2% and RPI at a whopping 8.2%.
Back in November when the October figures were announced (CPI at 4.2% and RPI was at 6%), the Paul Johnson of the IFS said
“With tax rises in April and inflation set to hit 5% someone on average earnings will need a wage rise of over 7% to keep their living standards constant.”
Typically, all of those forecasts have been surpassed – at least in part due to the war in Ukraine, but there are plenty of other factors too. It would be interesting to see what figure the IFS would now recommend for a ‘standing still’ pay increase?
Firstly, there are other factors that will hit everyone but will be disproportionately worse at the lower end of the pay scale. National Insurance increases will hit everyone, soon – the thresholds increase and the 5p cut in fuel duty announced yesterday may help a bit, but not much.
🚨 NEW: 600,000 people will be pulled into poverty due to inaction at the #SpringStatement
We've modelled the impact of the failure to increase benefits in line with inflation, along with the 1.25% ⬆️ in National Insurance and change to the earnings threshold at which it is paid pic.twitter.com/TPT9jY1xzb
— Joseph Rowntree Foundation (@jrf_uk) March 23, 2022
Secondly, the inflation figures are hiding different impacts both regionally, and based on income levels.
• if you drive a car (and freelancers in our industry sectors are more likely to need to do this), it’s worse
• if you are a low income, basic food costs have risen dramatically (pricey ready meals have actually barely increased in price, but rice, pasta, basic veg, etc has gone through the roof)
• housing costs have gone up a lot in some parts of the country – more than in others
• household energy bills are hitting everyone differently
You may want to direct members to this briefing from the House of Commons Library [pdf] to get a clearer picture of how it is impacting everyone:
JRF are particularly scathing about the impact this will have on the lower income groups.
The most vulnerable families and pensioners received little or no immediate support with the rising cost of living in the #SpringStatement.
— Joseph Rowntree Foundation (@jrf_uk) March 24, 2022