Scores of leading economists today accuse Boris Johnson of “fighting the wrong battle” over workers asking for pay rises in the cost-of-living crisis.
Grafters are seeing their real incomes plummet amid soaring inflation, currently running at 9% and tipped to hit 11% later this year.
Rocketing prices have triggered growing demands for higher wages.
But the Prime Minister has claimed an economic crisis could unfold if pay continued to chase price hikes.
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He said last week: “When a wage-price spiral begins, there is only one cure and that is to slam the brakes on rising prices with higher interest rates.”
But 65 top economists today tell the PM he is wrong.
In a letter – seen exclusively by the Mirror – they tell Mr Johnson: “Suppressing wages is the exact opposite of what is needed in response to this current wave of inflation, and risks fuelling dramatic increases in poverty and hardship, and ultimately a recession.
“It is not the product of domestic wage demands.”
The 389-word letter is signed by a host of academics, including professors from Oxford University; Brown University in Rhode Island, US and Fribourg University, Switzerland.
They were joined by bosses of the Autonomy, New Economics Foundation and the Economic Change Unit.
The letter went on: “The Bank of England has made it clear that labour market pressures account for only a fraction of the price increases we have experienced in recent months.
“There is no ‘wage-price spiral’ in the UK.
“In fact, wage growth has lagged far below the increase in prices.
“By taking aim at workers asking for pay rises in the face of big hikes in food and fuel costs, the Government is fighting the wrong battle.”
University of Greenwich economic professor Ozlem Onaran said: “Workers’ pay rises aren’t causing inflation and asking workers to pay for the cost-of-living crisis by capping their wage demands will only deepen the crisis.
“After a decade of wage squeezes we need to change course, with a higher minimum wage, pay rises in the public sector, boosting social security and giving trade unions the power to negotiate decent pay rises for all workers.”
The full letter to Boris Johnson
Dear Prime Minister,
We are writing following your recent speech in Blackpool in which you warned of the dangers of a ‘wage-price spiral’ and argued that wages should therefore not rise to keep up with rising prices.
As economists and economic policy experts, we believe that suppressing wages is the exact opposite of what is needed in response to this current wave of inflation, and risks fuelling dramatic increases in poverty and hardship, and ultimately a recession.
Inflation today comes from huge external factors, including the aftershocks of lockdowns, war in Ukraine, and extreme weather events across the globe.
It is not the product of domestic wage demands.
The Bank of England has made it clear that labour market pressures account for only a fraction of the price increases we have experienced in recent months.
There is no ‘wage-price spiral’ in the UK. In fact, wage growth has lagged far below the increase in prices.
By taking aim at workers asking for pay rises in the face of big hikes in food and fuel costs, the government is fighting the wrong battle.
Workers have experienced over a decade of stagnant real wages, which have suppressed living standards and led to a huge growth in in-work poverty.
Steep price rises for essentials today, from food to energy to rent for housing, are coming on top of a decade of exceptionally low wage growth.
In this scenario, it is perverse to lay the blame for rising inflation at the door of the workers.
In fact, the greater risk is that incomes rise too slowly, entrenching poverty and pushing more families over the edge into destitution, whilst also further undermining demand in the economy and plunging the country into a recession.
We therefore urge you to take urgent, additional action to support living standards, by committing to substantial increases in the minimum wage, public sector pay, and social security payments.
Instead of asking ordinary people to bear the cost of tackling the inflation crisis, the government should focus on tackling the real causes of the crisis, using all the tools at its disposal to hold down energy costs, clamp down on excess profits, and unblock global supply chains.
Making ordinary families poorer is a strategy that will only lead to more misery and accentuate the impacts of the current crisis.
- Christopher Cramer, Professor of the Political Economy of Development, SOAS University of London
- Barbara Hariss-White, Emeritus Professor and Fellow, University of Oxford
- Judith Heyer, Emeritus Fellow, University of Oxford
- Susan Himmelweit, Emeritus Professor of Economics, Open University
- Suzanne J Konzelmann, Professor of Economics, Birkbeck, University of London
- Simon Mohun, Emeritus Professor of Political Economy, Queen Mary University of London
- Richard Murphy, Professor of Accounting Practice, Sheffield University Management School
- Ozlem Onaran, Professor of Economics, University of Greenwich
- Carlos Oya, Professor of Political Economy of Development, SOAS University of London
- Kate Pickett, Professor of Epidemiology, University of York
- Sergio Rossi, Professor of Macroeconomics and Monetary Economics, University of Fribourg
- Diego Sanchez-Ancochea, Professor of the Political Economy of Development, University of Oxford
- Pritam Singh, Professor Emeritus, Oxford Brookes Business School
- Guy Standing, Professorial Research Associate, SOAS University of London
- Cyrus Bina, Distinguished Research Professor of Economics, University of Minnesota
- Mark Blyth, Professor of International Economics, Brown University
- Guglielmo Forges Davanzati, Professor of Political Economy, University of Salento
- Jean Luc de Meulemeester, Professor of Economics and History of Economic Thought, Université Libre de Bruxelles
- David Tyfield, Professor in Sustainable Transitions and Political Economy, Lancaster University
- Mehmet Ugur, Professor of Economics and Institutions, University of Greenwich
- Carolina Alves, Joan Robinson Research Fellow in Heterodox Economics, University of Cambridge
- Mary-Paz Arrieta-Paredes, Senior Lecturer, University of Greenwich
- Hannah Bargawi, Joint Head of Economics, SOAS University of London
- David Barlow, Lecturer in Economics, Newcastle University Business School
- Alberto Botta, Associate Professor of Economics, University of Greenwich
- Christine Cooper, Chair in Accounting and Director of Research, University of Edinburgh
- Sara Gorgoni, Associate Professor in Economics, University of Greenwich
- Alexander Guschanski, Senior Lecturer in Economics, University of Greenwich
- Jason Hickel, Visiting Senior Fellow, London School of Economics
- Leslie Huckfield, Lecturer, Glasgow Caledonian University
- Neil Lancastle, Senior Lecurer, De Montfort University
- Stewart Lansley, Visiting Fellow, University of Bristol
- Jane Lethbridge, Associate Professor in Public Policy, University of Greenwich
- Sara Maioli, Senior Lecturer in Economics, Newcastle University
- Imko Meyenburg, Senior Lecturer in Economics and International Business, Anglia Ruskin University
- Jo Michell, Associate Professor of Economics, University of West England Bristol
- Maria Nikolaidi, Associate Professor in Economics, University of Greenwich
- Cem Oyvat, Senior Lecturer in Economics, University of Greenwich
- Jeff Powell, Senior Lecturer in Economics, University of Greenwich
- Lucia Pradella, Senior Lecturer in International Political Economy, King’s College London
- Kobil Ruziev, Associate Head of Department, University of West England Bristol
- Josh Ryan-Collins, Associate Professor in Economics and Finance, University College London
- Navjot Sangwan, Lecturer in Economics, University of Greenwich
- Luca Tasciotti, Senior Lecturer in Economics, University of Greenwich
- Elisa Van Waeyenberge, Senior Lecturer, SOAS University of London
- Rafael Wildauer, Senior Lecturer in Economics, University of Greenwich
- Yuliya Yurchenko, Political Economist, University of Greenwich
- Patrick Allen, Chair, Progressive Economy Forum
- Christine Berry, Independent Researcher,
- Fran Boait, Executive Director, Positive Money
- Sarah-Jayne Clifton, Executive Director, Economic Change Unit
- Miatta Fahnbulleh, Chief Executive, New Economics Foundation
- Lucy Findlay, Managing Director, Social Enterprice Mark Company CIC
- Katie Gallogly-Swan, Economic Affairs Officer, UNCTAD
- Níall Glynn, Founder, Working Class Economists Group
- Joe Guinan, Vice President, The Democracy Collaborative
- Lukas Hardt, Policy and Engagement Lead, Wellbeing Economy Alliance Scotland
- Paul Hebden, Acting Executive Director, Tax Justice UK
- Luke Hildyard, Director, High Pay Centre
- Mathew Lawrence, Director, Common Wealth
- James Meadway, Director, Progressive Economy Forum
- Howard Reed, Director, Landman Economics
- Sara Reis, Deputy Director and Head of Research and Policy, UK Women’s Budget Group
- Mary-Ann Stephenson, Director, Women’s Budget Group
- Gary Stephenson, Independent Economist,
- Will Stronge, Director, Autonomy
- Geoff Tily, Senior Economist, Trades Union Congress