Stagnating manufacturing pay foretells the failure of economic rebalancing

In his Budget 2011 speech, George Osborne promised to herald a ‘march of the makers’ – to absolutely no avail. He made a similar claim in his Budget 2014 speech, as manufacturing again featured heavily among the measures announced. Once bitten, twice shy: stagnating pay in manufacturing, as the numbers employed in the sector plummets, tells us that the government’s strategy for manufacturing isn’t working.

Manufacturing jobs, generally speaking, are averagely paid. As previous TUC research on the apparent economic recovery demonstrates, the cost of living crisis brought about by declining real wages can actually be explained, to some extent, by a decline in jobs in median-paying industries, such as those in the manufacturing sector. Crucially, these jobs are being replaced by employment growth in lower-paying services sector industries.

But we might still expect the jobs that remain to be the better-paying ones. Neoclassical economic theory tells us that lower-paid manufacturing jobs will relocate to the developing world, while countries like the UK concentrate on higher value-added manufacturing activities. Coupled with the coalition government’s emphasis on supporting ‘advanced manufacturing’, as part of efforts to rebalance the economy, a more technology-intense sector should result in higher pay, relative to other sectors, for those that construct, operate and maintain manufacturing technologies.

Sadly, this effect remains to be seen.

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Image: Dave Gibbs