The above graph shows UK real wages growth (i.e. UK wage rises minus consumer price inflation), % increase year on year, from 1983 to 2008 (data from The Economist).  Whilst there are fluctuations from year to year with the economic cycle, it seems to me there is a distinct downwards trend here, dating from well before the 2007 Credit Crunch times. In fact, if the graph had stripped out retail price Inflation (as opposed to consumer price Inflation), the downwards trend in real wages would probably have been greater because 'recent' (i.e from around 1997, start of last housing boom) RPI figures have tended to outstrip recent CPI fugures - because the RPI includes housing cists, the CPI doesn't, and up till 2007, housing costs were rising faster than inflation generally.

 

This of course explains why UK households are amongst the most debt-stretched in Europe - we've been cajoled into spending ever more, and paying for ever rising house privces, taking out ever larger mortgages, just as our pay packet growth was faltering.

 

Now I'm wondering, how do we recover ourselves out of all this, I can't see the government or the bosses suddenly paying us a lot more, the goivernment isn't going to reduce taxes just now, and if we all feel poorer, we won;t spend on consumer goodies and house pricesd will keep falling, simply making us all feel even poorer.  Except for those of us who've been renting for the past 2 years or so, maybe - please don't pass this email on to my landlord, hope he's not on crit-geog ;>)

 

So, should I a) flee the country whilts the airlines are still working (Ryanair cuts, Swine Flu)

b) build my own shelter andf fill it full of tinned food and bottled water?

c) just sit tight till I can buy a large house in a nice part of London for £50,000 or so?