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US research on living standards influences Labour policy US research on living standards influences Labour policy
(about 7 hours later)
Labour is set to draw on what is described as "the most important chart in American politics" to make the claim that long-term stagnation of living standards in UK, as opposed to purely low growth, may be the dominant issue facing the country at the next election. Labour is set to draw on what is described as "the most important chart in American politics" to claim that long-term stagnation of living standards in the UK, as opposed to low growth, may be the dominant issue facing the country at the next election.
Labour is drawing on research by the New Democrat Network central to the Obama re-election campaign to shape its own election thinking. Labour is drawing on research by the New Democrat Network (NDN) central to the Obama re-election campaign to shape its own election thinking.
The research was described by the Obama campaign as its North Star. It tracked three trends in the US economy between 1992 and 2009, showing how two trends – higher growth and higher productivity – has not been matched by rise in living standards for the majority. The research was described by the Obama campaign as its North Star. It tracked three trends in the US economy between 1992 and 2009, showing how two – higher growth and higher productivity – had not been matched by a rise in living standards for the majority.
The Resolution Foundation thinktank, the leading voice on UK living standards, will next week produce its own State of the Nation report showing how long it is going to take to return to rising living standards in the UK even if growth returns. Labour will also launch its own exercise – "the condition of Britain" – next week, Labour's policy review chief, Jon Cruddas, revealed. The Resolution Foundation thinktank, the leading voice on UK living standards, will next week produce its own State of the Nation report showing how long it will take to return to rising living standards in the UK even if growth returns. Labour will also launch its own exercise – "the condition of Britain" – next week, its policy review chief, Jon Cruddas, has revealed.
The analysis suggests Labour cannot respond simply with a promise to stoke demand since growth alone will not address the issue of rising inequality and stagnant living standards for the majority. The analysis suggests Labour cannot respond simply with a promise to stoke demand, since growth alone will not address the issue of rising inequality and stagnant living standards for the majority.
It also indicates that the crisis of living standards predates the City-induced recession of 2008.It also indicates that the crisis of living standards predates the City-induced recession of 2008.
"The reason this is happening is because of rising global competition, the defining new economic challenge of our time," Simon Rosenberg, the head of the New Democrat Network said in a recent interview. "In the actual experience of the American economy, there has become an enormous gap between the upper one-third and everyone else." "The reason this is happening is because of rising global competition, the defining new economic challenge of our time," Simon Rosenberg, the head of the New Democrat Network, said in a recent interview.
The chart hung in the Obama campaign office, along with a caption derived from a focus-group participant: "I'm working harder and falling behind." That same line was repeated by the president in his campaign stump speech. "In the actual experience of the American economy, there has become an enormous gap between the upper one-third and everyone else."
Douglas Alexander, the shadow foreign secretary and a close student of US politics told the Guardian: "Back in 1992 the famous dictum of Bill Clinton's adviser James Carville was 'it's the economy stupid'. It contained the implicit assumption that economic growth ensured rising living standards. Today that no longer can be taken for granted, as this important research by NDN and the Resolution Foundation shows. I've worked closely with the NDN in recent years and that collaboration confirms to me this is one of the defining challenges for today's progressives on both sides of the Atlantic." The chart hung in the Obama campaign office, along with a caption derived from a focus group participant: "I'm working harder and falling behind." That same line was repeated by the president in a campaign stump speech.
Kelly's work similarly meticulously maps how growth prior to 2008 in the UK did not guarantee a rise in living standards, and how the bottom half of society suffered. UK wage stagnation is more recent than the US – theirs started in the 1970s, the UK in the early 2000s. Douglas Alexander, the shadow foreign secretary and a close student of US politics, told the Guardian: "Back in 1992 the famous dictum of Bill Clinton's adviser James Carville was: 'It's the economy, stupid.' It contained the implicit assumption that economic growth ensured rising living standards.
One reason is the decline in labour as a share of national income – down from 68% in 1991 to a low of 63% in 2008 just before the crisis. To make matters worse national insurance and pension took a larger part of labour costs, and finally much of the rise in lower incomes has been due to the 4% annual increase in tax credits, a route that is now closed to government. "Today that no longer can be taken for granted, as this important research by NDN and the Resolution Foundation shows. I've worked closely with the NDN in recent years and that collaboration confirms to me this is one of the defining challenges for today's progressives on both sides of the Atlantic."
In America the figures in the table are attributed to increased income inequality owing to globalisation and new technology – the wealthy becoming much wealthier, while the rest stayed the same. It is also increased corporate profits, as new markets opened overseas and new technology lowered costs. Similarly, work in Britain maps how growth before 2008 did not guarantee a rise in living standards, and how the bottom half of society suffered. UK wage stagnation is more recent than in the US – theirs started in the 1970s, the UK's in the early 2000s.
One reason is the decline in labour as a share of national income – down from 68% in 1991 to a low of 63% in 2008 just before the crisis.
To make matters worse national insurance and pension took a larger part of labour costs, and finally much of the rise in lower incomes has been due to the 4% annual increase in tax credits, a route that is now closed to government.
In America the figures in the table are attributed to increased income inequality owing to globalisation and new technology – the wealthy becoming much wealthier, while the rest stayed the same.
It is also due to increased corporate profits, as new markets opened overseas and new technology lowered costs.
The analysis led Obama to make the argument, in December 2011, that the economy grows from the middle out. This argument was a direct refutation of the supply-side argument that claims that economic growth comes from lowering costs for businesses, most especially keeping taxes low and enacting limited regulations.The analysis led Obama to make the argument, in December 2011, that the economy grows from the middle out. This argument was a direct refutation of the supply-side argument that claims that economic growth comes from lowering costs for businesses, most especially keeping taxes low and enacting limited regulations.
Whether or not this argument will work for Labour is critical since it is likely growth will have returned by the next election. Figures published by the Institute for Fiscal Studies this week show growth rising to 2.1% in 2014, below the projected 3.1% in the US but way above the eurozone of 1.1%. Whether or not this argument will work for Labour is critical since it is likely growth will have returned by the next election. Figures published by the Institute for Fiscal Studies (IFS) this week show growth rising to 2.1% in 2014, below the projected 3.1% in the US but way above the eurozone of 1.1%.
In election year the IFS is predicting UK growth of 2.4%, 1% higher than the eurozone.In election year the IFS is predicting UK growth of 2.4%, 1% higher than the eurozone.
Such numbers will provide Cameron with the ready-made argument that the worst is over and it would be foolhardy to re-elect the party that created the mess in first place.Such numbers will provide Cameron with the ready-made argument that the worst is over and it would be foolhardy to re-elect the party that created the mess in first place.
But if Labour can counter something deeper and more long-term is at work and needs addressing, the power of that Cameron propaganda is reduced.But if Labour can counter something deeper and more long-term is at work and needs addressing, the power of that Cameron propaganda is reduced.