So, with real wage increases running at a negative rate of 0.9% based on this data and annual wage increases being 2.1% per annum the Bank of England is going to compound the misfortune of most people by increasing interest rates.
I don’t think this is by itself the tipping point which will make most people realise just how irrelevant they are to those who make decisions on economic policy in the UK, but it will certainly add to the sense of dis-ease that many will have on that issue.
As acts of economic folly go this one will take some beating. It is, after all, contemptuous of most people in the country.
Hmm. We’ve inflation. What’s the usual response to inflation? Raise interest rates. Get that inflation lower and nominal wage increases will translate into real wage increases.
Ah, but wait! This is not inflation in the sense of a general price rise in the UK due to capacity constraints. It is, instead, import led driven by the fall in the value of the pound. So, what does raising interest rates do? Raises the value of the pound. Thus removing, possibly even reversing, that import led inflation. And thus neatly returning us to our nominal wage rises leading to real wage rises.
Gosh, this international political economy is tough stuff, isn’t it? Quite beyond the ken of the Senior Lecturer in the subject at Islington Technical College.