Earnings Comparisons (Hansard, 13 November 1985)

§ Lord Hatch of Lusby
My Lords, I beg leave to ask the Question standing in my name on the Order Paper.

§ The Secretary of State for Employment (Lord Young of Graffham)
My Lords, the lower and upper deciles of the earnings distributions for full-time men aged over 21 increased by 76 per cent. and 103 per cent. respectively.

§ Lord Hatch of Lusby
My Lords, is it not the case that those figures demonstrate that under this Government the poor have got poorer and the rich richer, particularly in view of the fact that, according to a document issued by the noble Lord's department the rise in retail prices over that same period is 74.6 per cent.? Secondly, can the Minister explain how it is that if, as his figures show, the lower 10 per cent. of income earners have had increases in their pay less than the increase in retail prices, he still maintains that the workers of this country are pricing themselves out of jobs?

§ Lord Young of Graffham
No, my Lords; the lowest decile has had an increase of 76 per cent., yet over that period the increase in the cost of living was 74½ per cent., so the lowest have done better. What the change between the upper and lower deciles shows is a restoration of a proper sense of differences which are earned by ability to create wealth.

§ Lord Molloy
My Lords, will the noble Lord be good enough to look into one specific case that is causing grave concern, which is the threat now being made to London bus drivers that they could possibly have a reduction in their earnings of between £30 and £50 a week?

§ Lord Young of Graffham
My Lords, I believe there will be an opportunity to raise this matter before the House in the near future.

§ Lord McCarthy
My Lords, if I understand the noble Lord, he says that the differences result from a greater ability to create wealth. Does he say that since 1979 all the increases in the upper decile as against the lower decile—which are quite unprecedented and did not occur in any country over this period—were examples of increased ability to get wealth? What has that to do with pricing people into work.

§ Lord Young of Graffham
No, my Lords, not many other countries went through a period as we did in the 1970s in which these differences were artificially narrowed.

§ Lord Boyd-Carpenter
My Lords, does my noble friend, who has been asked a question about the gross earnings of these two sections of society, have with him the net figures after tax?

§ Lord Young of Graffham
Yes, my Lords, there are differences after tax and the differences result in a narrowing in the differentials. But what the Government are determined to do is to let the market allow people to attain their proper levels. This means raising all levels of wages. This means restoring a profitable industry and commercial sector to allow the bottom decile and the top decile to earn more, but not taking a view of the differentials between both.

§ Lord Hatch of Lusby
My Lords, first may I ask the noble Lord to look again at the figures he has given to the House because, according to my understanding of his own department's new earnings survey, the figure since 1975 was not the 76 per cent. that he gave but 268 69.8 per cent. compared with the increase in retail prices of 74.6 per cent?
Be that as it may, is it not very clear that during this relevant period the increase for the top 10 per cent. has been greatly in excess of the increase for the bottom 10 per cent.? If that is the case will he answer my second question, which he has not yet answered? How can he equate that with his constant repetition of the theory that the workers of this country are pricing themselves out of jobs? Surely unemployment is much higher among the bottom 10 per cent. of income earners than among the top 10 per cent.?

§ Lord Young of Graffham
My Lords, the noble Lord has asked a number of new questions but I can only repeat that the figures given by my department show that the increase in the lower decile is 76 per cent. Should there be any cause to correct that I shall let the noble Lord know, but I see no reason to do so.
One of the greatest causes of misconception on the part of noble Lords opposite concerns the way in which we get a better increase in wealth creation in this country. We do not want low wages but we need low unit costs. This Government are about increasing and improving profitability; getting competitiveness going; getting unit costs down so that income levels in the lowest decile or in the top decile will go up. That is the only way to see this happen. When the Government say that people must price themselves into work they refer not only to wages but, more importantly, to low and competitive unit costs.

§ Lord Jacques
My Lords, does the Minister agree that, to get lower unit costs, there are many things which ought to take priority over low wages?

§ Lord Young of Graffham
Yes, my Lords, there are work practices and a whole range of other matters which have to take priority. Low wages is only one factor. It is not low wages by itself but the combination of proper wages and work practices which results in productivity.

Lord Bruce of Donington
My Lords, will the noble Lord please agree that it is not only labour costs that enter into unit cost? The unit costs in fact contain an element of investment, an element of improved machinery, an element of improved supervision and, yes, an improved element in overheads, including management and directors' salaries. These are all part of unit cost.

§ Lord Young of Graffham
My Lords, I am very happy to agree with the noble Lord, Lord Bruce of Donington. Yes, of course they are all part of unit cost. That is why the Government direct their attention at unit cost and not to low wages.

§ Lord Mackie of Benshie
My Lords, can the Minister tell us how successful the Government have been? By how much have unit costs fallen since 1979?

§ Lord Young of Graffham
My Lords, that matter is the reason why the Government are raising it—because our unit costs are going up and up and those of our principal competitors are going down. We 269 will continue raising it until the world rights itself, as I hope it will.