I read two startling different commentaries on the health of the UK as a society this morning that made me recall the “best of times, the worst of times” quote from Dickens.
First up was a highly optimistic piece in the Financial Times titled Miserablism risks causing Britain serious harm which argues that we should all wake up to the fact that times are good right now and be wary of policies and politicians proposing radical moves that might well make things worse – e.g. price interventions and exiting Europe. This is the money quote:
Look at Britain as an informed foreigner might. Here is a country that responds to a secessionist threat to its existence by holding a free and fair referendum. It has evolved an economic model that is more hospitable to business than much of Europe and kindlier to the poor than America. It cuts public spending year on year without any civil disorder to speak of. Crime is falling. Unemployment is at 6 per cent. The politicians are small-time but basically honourable. The capital city is a miracle of the modern world.
Then I read the Guardian’s Bleak figures show a relentless slide towards a low-pay Britain which featured the graph below showing that real wages in Britain have now been declining for seven years in a row – only the third time that has happened in the last 150 years.
Between them these too perspectives capture the overall situation well. On the plus side the economy is performing well and society is stable, but on the downside, the spoils of growth are going to the rich, wage inequality is increasing and the social contract is in danger of falling apart.
The important question is what will happen next. The Guardian suggests two possibilities. The first is that unemployment is now reaching levels where there is little slack in the labour market and employers will find themselves having to increase real wages for the lowest paid. The second is that technological advances will continue to take jobs from mid-skilled workers, forcing them into lower paid jobs and driving real wages down. I’ve written about this before: Robots and artificial intelligence are replacing jobs.
Cycles in the economy and labour market will come and go, but the trend towards automation will run and run. For me the most likely scenario is that tightness in the labour market will force wages up over the next few years, but when the cycle turns again real wages will cycle sharply downwards. Our opportunity is take action now to help the situation. A couple of weeks ago rich Americans were worrying that The pitchforks are coming … for us plutocrats. That will be our fate too, unless we do something.
The solution is not to protect jobs or try to limit the adoption of technology, but to invest heavily in programmes that help people re-skill and get back to work. That would be the play that keeps us as when of best performing societies in the world. If we get through the current period of austerity successfully there might just have the money to do it.