| The OECD says that the share of top-income recipients in total gross income increased significantly in most countries over the past three decades. The rise was most spectacular in the United States, where the share of the richest 1% in all pre-tax income has more than doubled since 1980, reaching almost 20% in 2012. Top earners also fared very well in several other English-speaking countries including Australia, Canada, Ireland and the United Kingdom . |
Following the issue on Thursday of a dismal GDP
(gross domestic product) growth estimate of 0.2% in the Eurozone in the first
quarter of this year, later in the day in Washington DC, the Federal Reserve
reported that industrial production fell 0.6% in April and the Bureau of Labor
Statistics (BLS) reported that real (inflation-adjusted) US average weekly
earnings fell 0.1% over the month due to the decrease in real average hourly
earnings combined with an unchanged average workweek.
The BLS said that real average hourly earnings
rose 0.3%, seasonally adjusted, from April 2013 to April 2014. The increase in
real average hourly earnings, combined with an unchanged average workweek,
resulted in a 0.3% increase in real average weekly earnings over this period.
In New York earlier in the week the Dow and the
S&P 500 ended at record highs and
with the top 5% of Americans responsible for almost 40% of consumer spending,
the trickle down to the cash-strapped folk lower down the economic pyramid means
that absent the opportunity for equity release from rising home values,
consumer spending accounting for up to 70% of the economy, is on a wobbly
The Financial Times reports that last week,
Janet Yellen, the chairwoman of the US Federal Reserve,
warned a risk that had seemed vanquished was once again menacing the economy.
“The recent flattening out in housing activity,” she said in testimony to
Congress, “could prove more protracted than currently expected.”
Existing home sales fell 7.5% on a year ago in March while new housing starts
dipped 5.9% in the same month. However, home prices in major metropolitan areas
are up 12.9% on a year ago, according to the Case-Shiller index.
In Japan strong consumer demand helped boost GDP to an annualised 5.9% in the
January-March quarter. However, that rise mainly reflected spending in advance
of a 3% sales tax hike to 8% that took effect from April 1
Adam Posen, president of the Peterson Institute for
International Economics in Washington, predicted any pullback from
the tax rise would be short-lived. "You're going to have shortfalls in
consumption this next couple quarters. But it doesn't necessarily throw off the
fundamental path of the economy. It's not that big of a deal," said Posen in an
interview on a visit to Tokyo, according to The Wall Street Journal.
The Journal said that one short-term risk factor
is whether wage increases can keep pace with inflation. In the first quarter,
employee income in real terms was down 0.7% compared with year-earlier levels.
While many retailers have said the falloff in consumer demand in April was
within expectations, the tax rise could still crimp consumer spending over the
The spring wage negotiations did yield pay rises
for the first time in a decade, an average of €7,697 ($76) per month at large
firms. Labour cash earnings including wages and bonuses rose 0.7% year-on-year
Yet those headline pay increases have limited impact. Only about 10% of Japanese
workers are members of the unions participating in the negotiations, and pay
rises are concentrated at exporting manufacturers.
About 35% of the Japanese
workforce are temporary workers earning less than the Irish minimum wage of
On Wednesday, it was
reported that the UK unemployment rate fell to 6.8% in March
and average earnings in the first quarter were up 1.7% from a year earlier - -
the growth rate in wages - which includes bonuses and was slightly above the
inflation rate at 1.6% in March
- it means earnings rose faster than inflation for the first time since 2010.
Trade was a negative for German GDP in Q1 and
hourly wages having risen 2% in 2013 (1.4% in the Eurozone) and on
Thursday Destatis reported that collective bargaining negotiations since autumn
has resulted in agreements for minimum pay rises of 3%.
Contractions in the economies of the Netherlands
and Finland show the extent of the challenges, including falling demand in
emerging economies (Russia is Finland's biggest export market) with government
revenues in the later accounting for over 56% of GDP.
No only are earnings under pressure, there is
evidence of an increase in jobs that do not provide stable income.
In the 12 months in March 2014, the number
of employees increased by 351,000 to reach 25.63m;
the number of self-employed people increased by 375,000 to
Last month we reported that from Q1 2008 to Q4
all the net additional employment in Britain of 613,000 was in self-employment
and part-time roles.
The Office for National Statistics reported last
month that UK wages have been falling ‘markedly’ since 2007, and by 2012
were 6.1% lower in real terms five years earlier.
Meanwhile, wages were 4% higher in Canada, 2.8%
higher in France and 3.1% higher in Germany. Wages in the US were down 0.2% over
the same period.