4 March 2015

…but only because Londoner’s wages are getting worse


The financial times has found that pay disparity between London and the rest of the UK is narrowing. While this may sound like good news, it is due to wage growth in London slowing down, rather than the rest of the country catching up.

According to the FT annual pay rose 2.5 per cent in real terms for the median worker living in London and 5.9 per cent for the average UK worker between April 2008 and April 2014.

It is important to remember that just because most of the elite live and work in London, which pushes up average wages, it doesn’t mean that those at the bottom see any benefits. London contains some of the poorest, lowest-waged boroughs in the country, whilst also having the highest cost of living.

One reason for the narrowing of the gap might be that compared to the rest of the country London has a disproportionally large number of private sector workers. They are less likely to be unionised, and less likely to be part of a collective agreement. The service and hospitality makes up a large part of London’s economy, with most of these jobs likely to be minimum wages.

The IER recognises that collective bargaining is the most reliable way of reducing pay gaps. Reconstruction After the Crisis: A Manifesto for Collective Bargaining advocates collective bargaining at both enterprise and sectoral levels – a tried and tested means of reducing income inequality and ensuring economic resilience.