Mark Carney, the Bank of England’s governor spoke of a rise in wages when he addressed the TUC (Trade Unions Congress) in Liverpool on the 9th of September. In his speech, Mr. Carney gave a positive and confident forecast for the economy on the whole. During the course of next year, he predicted that the interest rate, wages, and inflation would turn the corner towards a brighter overall view of the UK economy.
In response to complaints that wages were not keeping up with inflation and demands that the minimum wage rate be more than doubled to 10 pounds an hour, Mr. Carney gave praise to the workers who had put up with wage cuts during the economic slump and added that,
“Employment does much more than provide the means to support workers and their families; it is essential to personal fulfillment and human dignity. Part of that dignity is being paid a living wage.”
The last time that wages fell as they have in the UK since the crisis began was all the way back in the 1920’s. The Bank of England however seems to believe that the light at the end of the tunnel has brightened and predicts a wage increase of 4% over the next three years as well as a fall in unemployment to approximately 5.5% from the current rate of 6.4%. Today there are approximately 1 to 1.5 million people employed all over the UK, and after the number of hours that people were working being was cut substantially throughout the crisis, at this point the total amount of hours worked has risen some 4% since the crisis began.
It is projected that interest rates will also be boosted. The interest rate in the UK has seen an all time low of 0.5% for the last five years. Economists predict that the interest rate will begin to rise next year and should in turn lead to inflation to normalize at 2% within the 3 year time period. Mr. Carney, however, said that he was not inclined to project that interest rates would be likely to return to pre-recession levels, but that, “With many of the conditions for the economy to normalize now met, the point at which interest rates also begin to normalize is getting closer.”
Mr.Carney did go on to express that the economy has now developed a momentum that will easily carry the UK into better and more prosperous times. Even though the governor sees the increases to be gradual and limited, he predicts that rates will increase exponentially and consistently with the stabilizing and sustainability of the rates of inflation and the levels of employment.
The Bank of England gave no indication of a pre-set plan of action. The time it will take for the economy to bounce back is still clearly uncertain. The predicted rise in wage rates has been cut to 1.25% by the Bank, which is nearly half of the previous prediction. Economists are, however, still relatively positive that the changes will bring a durable solution and definite growth for the economy overall.
All this being said, the citizens of the UK can definitely expect changes for the better, albeit slowly, but isn’t that how the tortoise beat the hare to the finish line?