UK: THE RISE OF THE EARNING CURVE.

UK: THE RISE OF THE EARNING CURVE. - In the third of a series putting current statistics into historic perspective, Rhymer Rigby charts the changes in incomes of people of various callings from the 12th century to the 20th.

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Last Updated: 31 Aug 2010

In the third of a series putting current statistics into historic perspective, Rhymer Rigby charts the changes in incomes of people of various callings from the 12th century to the 20th.

Some records stretch back a surprisingly long way. Building craftsmen began keeping track of their wages in 1264, the year before Parliament's foundation, when a day's pay was three (very) old pence or slightly more than one new penny. By 1850 they could hope for somewhat more - roughly 20p per day - an annualised increase of about 0.5% over the intervening centuries. Now, more than 700 years later, nominal pay has risen 400-fold, reflecting a precipitous rise in both inflation and living standards.

For other vocations such as mining, the traditional professions and manual work, records exist as far back as the early 18th century, though they are often patchy. By amalgamating these, various other indices, and later series it is possible to build up a broad picture of how various callings have fared over the past few centuries.

At the beginning of the 18th century wages were generally low; a farm worker might take home £18 per year or about £800 in 1995 money. Although by current UK standards this may seem incredibly meagre, it still compares favourably with present-day earnings in some Third World countries. By contrast, an engineer could expect to earn £130 per year, equivalent to about £6,000 today.

Over the next 100 years wage rates were fairly static; long-term inflation was low and, for most, real earnings grew very little, though the clergy saw a small but significant increase. Forty years on, as Britain's economic growth rate accelerated, real incomes were rising, especially those of professionals. By the mid-19th century some of the better paid lawyers were earning £1,800 per year, worth around £50,000 today. But as could be seen from the infamous Victorian slums, poverty was still widespread among the working classes.

So far the 20th century has seen spectacular gains for both skilled and unskilled workers, with their real wages showing a six-fold increase, while professional and managerial wages have risen very little in real terms. This has been due to a variety of factors including legislation, increased productivity, and the unionisation of workers. Particularly strong gains were made in the 1960s and '70s, when union power was at its peak. The appreciable wage differentials that still exist, despite this convergence, attest to how much greater the gap between workers and managers once was.

Unlike other groups, the clergy has seen little real growth in incomes since the early 18th century, when a vicar was likely to be earning more than a lawyer - his present day counterpart earns a comparatively meagre £13,000 (excluding benefits). Average figures from this period conceal striking disparities, as income was often dependent on the land owned by a particular church. When the Prince Bishops (of Durham Cathedral) were enjoying riches to rival the King's, a vicar from a small landless city church could be living on as little as £10 per year.

The current furore over executive salaries suggests wage rises have once again diverged to favour the rich. As the graph covering male earnings over the past 25 years shows, everyone has become significantly richer but the relative gains of high earners have far outweighed the gains of those lower down. This widening gap, suggests Dr Frank Wilkinson of the Applied Economics Department at Cambridge University, could be due to a number of factors, including the disappearance of skilled jobs, such as those in manufacturing, and a sharp decline in the relative strength of the unions, whose powers have been severely eroded since 1979, leaving many of the lower paid underrepresented at the negotiating table.

Women's wages have risen even more steeply: average female real wages more than doubled since 1970, but are still only 53% of the male equivalent today. At the upper end of the scale this gap is more pronounced, reflecting continued male dominance in top positions.

What, then, of the future? It is difficult to tell whether the current (ie, post-war) trend of real wage rises is an anomaly or not. 'Real growth of 2.5% per year is relatively high in an historical context,' says Professor Charles Bean of the London School of Economics, but 'there is no reason why wages should grind to a halt. I don't believe that will ever happen, though the rate of growth may slow.' At the post-war rate of increase real wages double every 28 years but the corresponding rise in people's expectations means that what amounts to a large increase in wealth goes largely unnoticed. 'You've never had it so good' is a catchphrase that almost any post-war prime minister could have easily made his or her own.

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