Are wages failing to keep pace with rising prices and benefits?

"Average train fares have risen nearly three times faster than average wages since the beginning of the recession in 2008."

The Guardian, 2 January 2012 [citing the TUC].

"Figures highlighted by Iain Duncan Smith show jobless benefits rose 20% in the last five years, compared with an average 12% rise in private sector pay... But Labour opposes the [proposed cap in benefits rises] and said jobseekers allowance had failed to keep pace with wages over the past 10 years."

BBC, 2 January 2012

January is often the time of year where household budgets are strained the most, as people count the cost of Christmas excesses. According to Citizens Advice, more people took out payday loans over this festive period than ever before.

But is there a secondary problem? According to news reports yesterday, wages are failing to keep up with rises in train fares and benefits payments.

So is the cost of living really rising for working people?

Analysis

The first thing we need to establish is the extent to which wages have been rising over the past few years, which we can do by looking at the results of the Annual Survey of Hours and Earnings (ASHE), available through NOMIS.

Data is available on hourly, weekly and yearly wages, and can be broken down into full-time and part-time workers, and each will show slightly different trends. We've chosen to focus on the yearly earnings of full-time workers here for the sake of brevity.

Looking at this reveals that in 2002 the median annual salary for a full-time worker was £20,376, while a decade later it was £26,462; a growth of just under 30% (although we do need to allow for some error, as there were methodological changes made to the survey in 2003, 2006 and 2011).

So how does this compare to rises in train fares over the same period?

Data on the prices paid by travellers for the use of the railways is harder to come by, not least because prices vary considerably depending upon the time of travel and when the ticket is purchased (a topic we've looked at previously).

However the average increase in fares across the network is regulated by Government: since 2004 this has been set at the rate of RPI inflation plus one percentage point (for more information about how this is calculated, see this piece from last year). 

The most recent rise has seen season ticket prices go up by 4.3% on average, and fares overall rise by 3.9%, although there will be significant variation between routes (the Guardian Datablog has collected some route specific information here).

The Department for Transport has tracked the rise in the average rail fare, and publishes the results in its Transport Statistics dataset. From this we can see that fares have increased by around 58% since 2002, significantly faster than wages have risen.

Comparing the average wage rise to the uprating of out-of-work benefits is, however, more complicated.

Labour chooses to focus on Jobseekers' Allowance, which it claims has not kept pace with increases in wages, although this is only one of a number of 'out-of-work' benefits.

However even allowing for this, the rise in JSA can be measured a number of different ways, as claimants are entitled to different amounts depending upon their circumstances.

If we look at the rate paid to single people over 25 (the rate which is also paid to lone parents over 18), the JSA entitlement has risen from £53.95 to £71 between 2002 and 2012 - an increase of 31.6%, just above the average wage increase.

However if we look instead at changes to the average claim amount across all claimants, then wages have indeed risen faster, with the average JSA claim increasing by just 17.4% over the past decade.

This doesn't mean that Iain Duncan Smith is wrong however, as the relative speed of the change varies depending upon the start point used, as the graph below shows. The Work and Pensions Secretary instead focuses on the wider group of out-of-work benefits, and looks at changes since 2007, during which time wages have risen more slowly during the poorer economic conditions.

Conclusion

All three claims about the relative speed of rises to wages, benefit claims and rail fares can be substantiated, however each can be measured in different ways, which means a plethora of different interpretations can be supported, given the right time period and metric.