Inflation and levelling-up

Last month’s Labour Party Conference vote for a minimum wage of £15 an hour https://www.bbc.co.uk/news/uk-politics-58713344 raises the inflationary Seventies issue of pay parity versus pay differential. Those who were around then will recall that many strikes were about groups of workers trying to get the same pay as peers in other companies, and that settlements would be followed by higher-skilled workers looking for raises to reflect the greater value of their own labour.

An example of differential: the entry-level salary of a classroom teacher is £25,714 per annum https://www.nasuwt.org.uk/advice/pay-pensions/pay-scales/england-pay-scales.html#Classroom%20Teachers . Ignoring the five ‘Baker days’ of in-service training, teachers work 190 days a year and according to the NEU, an average of 49.5 hours a week https://neu.org.uk/state-education-staff-workload-wellbeing-and-retention . Crunch those numbers and you get a starter’s hourly rate of £13.67, after six years of self-investment by way of extra school, college and teacher training. Pay in that NEU survey was actually the least important reason for teachers wanting to leave; nevertheless, the economic disruption of wage competition is on the way.

It will sort itself out in the long run, provided two things happen:

1. At the same time as demanding minimum hourly pay rates, the Labour Party (and the current Conservative administration) must agree to controls on economic migration if they do not wish to see continued structural long-term unemployment and under-employment.

2. Similarly, the virtuous economic circle of individuals re-spending their earnings within the country is threatened by the leak of money abroad on consumer imports. We must do whatever we can to adjust trade tariffs and agreements; in any case, the world’s supply network is under increasing strain and our resilience is a growing concern.

It is good to read MP John Redwood’s strictures on central banks https://johnredwoodsdiary.com/2021/10/10/inflation-3/ and our national failure to plan for greater self-sufficiency. Really we have had the chance to make contingency plans for Brexit since January 2013 https://www.bbc.co.uk/news/uk-politics-33141819 , though the financial consequences of EU membership and wider globalisation were obvious for decades before that.

Mr Redwood notes that consumer price inflation is coming (and of course we have the energy crisis upon us, too.) When NS&I changed our index-linked certificates from RPI to CPI I suspected then that they had bet the wrong way, haha; but what to do with our non-protected cash? As a humble ex-IFA I see the stock market as a skyscraper straddling the San Andreas Fault; also, bond yields are miserable and likely to remain so, since raising interest rates would compromise the government’s finances, let alone ours.

The fight to retain the Northern Blue Wall has prompted the present administration to compete with the hapless faux-socialists and make noises about ‘levelling up’; perhaps that will be achieved in burning up our savings. I look forward to the funny speech Boris will make then; I’ll be needing a good laugh.