Tory budget 'a horror show' for the North Northern News Editor

 

A Northern observer believes the downturn will really be felt if the Tories win the next vote

THE EXTENT of low wages in the North may raise a few southern eyebrows.

According to figures published by ASHE - the annual survey of hours and earnings in Northern Ireland - the current median wage of all Northern employees is just £346 (€393) per week.

The median manufacturing weekly wage is £411, the equivalent rate for those in education is £628, and for those in health and social services the figure is £412.

Threatening clouds are now looming on the horizon - especially for those in Northern Ireland's massive public sector.

The past 12 months have seen state employees, and some in the private sector, spared the worst of the recession. Pay rates, already below levels in the South, have not been cut, VAT has been reduced to 15 per cent until next year, while some basic costs - such as fuel - have drifted temporarily downwards. Mortgage rates are virtually at zero and unlikely to jump soon.

But the burden of UK public debt means workers in the public sector, which comprises nearly two-thirds of the Northern economy, have yet to face the worst that this recession and the crisis in public finances can throw at them.

Soaring unemployment, rather than wage cuts, has flowed from the economic difficulties, with the numbers of jobless jumping over the past year.The official unemployment rate, of 6.1 per cent, which counts those without jobs and seeking work, hides the much larger problem - that of overall economic inactivity. This measure, which includes other adults who are not seeking work because of age, sickness and other reasons, stands at an alarming 583,000, out of a local population of just 1.7 million.

This is up 10,000 over the three months to last June and by 38,000 over the previous 12 months. The working age economic inactivity rate now stands at 29.5 per cent - by far the highest in the UK.

Prof Paul Teague, of Queen's University's school of management, says it is hard to be precise about what is happening to pay rates in the local economy due to lags in data collection.

But two points are worthy of note, he says: "First, the rate of growth in average earnings has fallen, more so in the private sector than in the public sector - but there has been no significant fall in real wages. Second, the economic crisis has had a differential impact on the pay of some workers more than others - workers in construction and some parts of retailing are more likely to have experienced a fall in their pay rates than those in the public sector."

He believes the full force of the downturn will not be felt in the North until, as expected, the Conservatives win next year's Westminster election and announce their budget strategy.

"The first budget of a new Tory government is likely to be a horror show for those in the public sector."

There has been no careful study done yet on whether prices for goods and services as well as wages are converging North and South, and the complicated picture is made more complex by currency fluctuations.

"Estimating accurately the underlying comparative price and cost structures of two economies is fraught with statistical difficulties," says Prof Teague.

"This is mainly to do with calculating properly what economists call purchasing power parity indices. But indications are that some convergence is taking place mainly in the retail sector, as many shops on the southern side of the Border are obliged to cut prices to maintain custom."

Newry is a case in point. While outlets owned by the British and Irish multiples such as Sainsbury's, Next and Dunnes are reporting astonishing trade, much of it cross-Border, the picture is different with the local stores. Even streets adjacent to Newry's two main shopping centres report disappointing numbers of shoppers, reflecting a local view that Southern shoppers travel North to avail of what they see as particular bargains, and little else.

Efforts by supermarkets in particular to address the cross-Border disparity in prices is being seen as having a moderating effect. But other disparities are becoming more noticeable, particularly in the case of professional services.

Those requiring dental care in the Republic, especially cosmetic, are being enticed as far north as Ballymena, Co Antrim to avail of significant savings.

Prof Teague says of the Republic: "There appears to be relatively little competition in this market, which tends to encourage relatively high prices for dental treatment." Relatively low wages in the North, he notes, help drive the lower prices there. ...

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