The Bank of England governor told us this week there has been a “lost decade” of wage growth. But is the truth really a lot worse than that?
By chance it was the same week my 90-year-old father decided to show me his carefully filed tax returns from the 1960s (yes, that’s what counts for fun in the Collinson household). In 1963-64 his pay as an accounts clerk in London was £1,357 a year. In today’s money that equals a little over £25,000 a year once inflation is taken into account.
In some ways that £25,000 doesn’t look so great. After all, someone working in a similar role with his level of experience at the time might expect £35,000-£40,000 today. But then look at what an income of £25,000 bought in 1963 in London.
You don’t compare incomes over time by looking at inflation. You look at incomes. Depending upon how you do it £1,357 then is £48-60k now. Which, agreed, is no great fortune in London but it’s not £25k in today’s money either, is it?
His granddaughter now works in the same city, London, for the same pay, £25,000. But what does an income of £25,000 buy you in 2016?
Well, actually, it buys you a basket of goods worth exactly the same as £1,357 bought you in 1963. Because that’s how we work out what the inflation rate is you gigantic, enormous, mong.