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Lies, damned lies and media economic reporting

Image: Jorge Franganillo

Forget Brexit, never mind the retail apocalypse, the UK economy has finally delivered the positive news that everyone has been waiting for.  That, at least, is the message from a legacy media largely reduced to rewriting corporate press releases…  In this case, the headline release from the Office for National Statistics (ONS) claiming that unemployment is down and wages are up.  As the BBC reported it:

“Wages saw faster than expected growth in the three months to July, as they continued to outstrip rising prices.  Excluding bonuses, wages grew by 2.9%, according to figures from the Office for National Statistics (ONS), well above the inflation rate.

“Earnings have now outstripped inflation for four months.

“Unemployment continued to fall, dropping by 55,000 to 1.36 million, with the jobless rate remaining at 4%, its lowest level for over 40 years.”

The devil is, of course, in the detail.  And the first detail we need to know is whether the 2.9 percent wage increase figure is adjusted for inflation.  According to the BBC it is well above inflation.  But is it?  Not according to the ONS:

“Latest estimates show that average weekly earnings for employees in Great Britain in real terms (that is, adjusted for price inflation) increased by 0.5% excluding bonuses, and by 0.2% including bonuses, compared with a year earlier.”

An increase in pay of a half of one percent (just 0.2% if you are part-paid with a bonus) is not quite the ushering in of a new age of prosperity the BBC is reporting.  Nor, it turns out is the fall in unemployment, which turns out to be the result of people dropping out of the statistics rather than people finding new jobs:

“The employment rate (the proportion of people aged from 16 to 64 years who were in work) was 75.5%, slightly lower than for February to April 2018 (75.6%) but higher than for a year earlier (75.3%)…

“There were 8.76 million people aged from 16 to 64 years who were economically inactive (not working and not seeking or available to work), 108,000 more than for February to April 2018 and 16,000 more than for a year earlier.”

This reading of the actual ONS report rather than the press release paints a very different picture to the glossy image presented by the BBC.  It is a picture of an economy in which pay is barely outpacing inflation (and which is about to be cudgelled by a combination of rising energy prices and interest rates) in which a sizeable number of older workers have opted to fall back on their pensions while younger workers fall back on parental support rather than continue the charade of seeking employment in a job market (outside London) that has very little to offer.

The bigger problem with the presentation of the ONS figures is the uncritical acceptance that the average wage is the best measure to use.  While it is certainly the best for presenting the most positive picture, it also serves to disguise widespread inequality.  As a recent statistical release by Her Majesty’s Revenue and Customs (HMRC) notes:

“Mean [i.e. average] pay is calculated by adding up the total pay for a country or region and then dividing this by the number of individuals receiving pay in this country or region.

“Median pay [on the other hand] is the pay of the individual in the middle of the pay distribution, that is to say where income is ordered from lowest to highest, the median income is the income at which half the number of individuals have both higher and lower pay than this individual.

“It is worth noting that the pay distribution, like other income distributions, is highly skewed because there is a large number of individuals at the lower end of the distribution and a small number at the higher end, therefore mean pay is higher than median pay…

“The mean pay from PAYE employment for the 2014-15 tax year across the UK was £22,520, rising to £22,890 in 2015-16, £23,510 in 2016-17 and £24,260 in 2017-18… Median pay from PAYE employment for the UK in the tax year 2014-15 was £16,060, rising to £16,360 in 2015-16, £16,840 in 2016-17 and £17,440 in 2017-18.”

In other words, average pay statistics help disguise the fact that most of us are paid significantly less, while a minority of high-earners push the average up.  Running a household on £17,440 per year is considerably harder than running one on £24,260 – and that £6,820 difference speaks volumes about why so many people are struggling to make ends meet and why so many retail outlets are going bust.

Perhaps the most alarming fact about the presentation of the ONS figures is that it took me – an independent blogger – less than 30 minutes to find the detail that gives the lie to the headline press release.  Meanwhile the BBC – one of the best funded media outlets on earth – is prepared to report what is effectively fake news by omission rather than ask one of its reporters to spend half an hour researching the story.

As you made it to the end…

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