Why the UK recession is lasting so long

FM — Wed, 21 Aug 2013 10:45:49 +0000

The United Kingdom’s double dip recession owes much to the protection of jobs and the incomes of people in work and the fact that employees reacted by increasing their savings ratio, but avoided private sector investments. The Federation of European Employers (FedEE)analyses the so-called « economic bubble » years from Q1 1998 to Q3 2007 output per worker in the UK as a whole rose by 23%, output per job by 23.8% and output per hour by 27.7%.

This balanced out well against a rise of just 25% in labour costs per unit of output over the same period. In other words, as output improved employers were sharing the benefits in an equitable way with their employees.  The third quarter of 2007 is when the economic bubble finally burst and this is clearly visible in productivity figures. Having peaked at an index figure of 104.7 in Q3 2007, output per worker fell to 98.3 in Q1 2009, before lifting slightly and then falling again from Q3 2011.
This means that over the period from Q1 1998 to Q1 2013 (the latest available data point) output per worker grew by just 16.8%. Even on the more generous measure of output per hour the productivity improvement over the 15-year period was just 21.8%. This would not have happened if employers had shed labour in line with falling demand.

Double dip

Yet companies took an even more surprising step, they protected pay levels for the underemployed workers they retained. As a consequence, over the 15-year period since 1998 – and wholly due to companies’ protectionist policies since Q3 2007 - labour costs per unit of output moved wildly out of step from labour productivity trends. Thus, whilst productivity levels since 1998 have risen by by just 16.8 – 21.8% labour costs per unit of output have jumped by 43.3%.  Commenting on these findings today, the Secretary-General of the Federation of European Employers (FedEE), Robin Chater, concluded that « the recession has clearly experienced a double dip largely because companies have been protecting employee pay levels at the cost of shareholder returns and investments in their business. Although sustained incomes should have led to a consumer spending spree – which would have eventually stimulated economic growth – employees simply increased their savings ratio by putting funds into building societies and government bonds rather than equities. »

Italy and Spain’s CEOs still enjoying high salaries, despite soaring unemployment levels

FM — Thu, 06 Jun 2013 16:35:40 +0000

The 12th edition of Europe’s most comprehensive review of remuneration levels has just been published by The Federation of European Employers (FedEE). Pay in Europe 2013 provides median pay figures for 32 job positions in 47 different countries and territories ranging from the micro states of Andorra and Liechtenstein to the continents biggest and most populous economies such as Germany and the Russian Federation

The figures are expressed as gross hourly rates and exclude bonus, commission, 13/14th month payments and benefits in kind.This year Denmark continues to offer the highest gross pay levels for those in middle order jobs, although the countries with the highest basic CEO salaries are in the two struggling economies of Italy and Spain. Generally, the differential between Europe’s poorer and higher paying countries is narrowing, although for some countries such as Moldova — where gross hourly pay levels are just 4% of those in Denmark — improvement remains slow. In fact, nine countries remain with median wages and salaries less than 10% of those in Denmark — Moldova (4%), Belarus (5%), Albania (5%), Ukraine (6%), Bulgaria (7%), Macedonia (7%), Serbia (7%), Romania (9%) and The Russian Federation (9%).

Bonus payments

Speaking today at the launch of this year’s report Robin Chater, Secretary-General of the Federation of European Employers (FedEE), pointed out that « the pay gap between Denmark the other higher paying states of Liechtenstein, Norway and Switzerland is now closing fast. There are also some signs that companies are converting bonus payments into base salary for senior staff and that in many eastern and southern European states the increased attentions of tax authorities is bringing many hitherto unrecorded payments into the formal payroll. Although gross salary levels in eastern Europe are rising, the continuation of inflation rates well above the European average is meaning that for many people in countries such as Romania and Turkey real pay levels are failing to improve. »

Finance Management » Robin Chater

Why the UK recession is lasting so long

Double dip

Italy and Spain’s CEOs still enjoying high salaries, despite soaring unemployment levels

Bonus payments