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British employment hits record high amid low wages


08:44, June 13, 2013

LONDON, June 12 (Xinhua) -- British employment figures released Wednesday showed the continued resilience of jobs growth against a backdrop of an economy that is performing well below trend growth.

Latest figure shows that the employment in Britain rose by 24,000 in the three months to May to stand at a record high of 29.75 million, after its economy has suffered two recessions and struggled for growth since the beginning of the global financial crisis in 2008.

The British economy now appears to have behaved in a different way to previous recessions, notably in the early 1980s and again in the early 1990s, in which recovery from recession was quicker, and unemployment figures were high.

"The main difference between 2008 onwards and previous recessions in the early 1980s and 1990s is that (in the latest recession) employment has been relatively resilient despite much bigger and persistent falls in output," Jin Wen-chao, research economist from the Institute of Fiscal Studies (IFS), said.


Jin said that real wages has been falling in the past few years, while in the early 80s or 90s employment took the hit rather than real wages. But this time it is wages rather than employment which have fallen a lot.

Jin said the reasons for a fall in wages were an increase in labor supply and changes in labor market institutions.

"There are more people willing to work and more workers willing to accept wage cuts or wage freezes," said Jin.

Changes in labor market institutions, more flexible short-term contracts and a decline in collective bargaining, had also played their part.

Fewer workers are unionised or covered by collective wage agreements now than in the past. Wage growth since 2008 has tended to be lower among workers who were not covered by such agreements, and they were more likely to experience nominal wage freezes in 2011.

"Such changes have made it easier for firms to reduce hours and wages in response to negative shocks," said Jin.

The fall in productivity might have been the reason for unprecedented falls in nominal and real hourly wages, which have occurred even amongst workers staying in the same job: one third of such workers saw their wages cut or frozen in nominal terms between 2010 and 2011.

Other European countries, such as Germany and France, had seen similar falls in productivity or stagnation of productivity since 2008 to that in Britain. But in the United States, the world's largest economy, it is a different story.

"The United States is an exception, where unemployment is relatively high, and wages have continued growing. That is similar to what happened in Britain in past recessions," Jin said.

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