James Moore: Wage cuts have created vast pool of out-of-work, under-educated youths

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The Independent Online

Outlook Welcome to low-wage Britain. The Institute for Fiscal Studies and the TUC don't have a lot in common, but they've both come up with studies that ultimately have rather similar conclusions.

The latter has complained of a £52bn shrinkage in wages, which it says were 7.5 per cent lower in 2012 than at the recession's eve in 2007. The IFS today basically confirms that. Its study shows that over the period since the recession began in 2008 Britons have endured a bigger fall in real wages than in any comparable five-year period.

The flipside is that large numbers of those workers have at least kept their jobs. The IFS's data on productivity suggests they're also doing less for their money. Productivity has fallen by an unprecedented degree.

There are some interesting conclusions to the study: smaller firms have tended to keep staff and cut pay, perhaps because they value the people they employ more and understand that hiring and firing is costly.

Bigger firms have been more inclined to do what they always do when times get tough: fire people. If recovery is around the corner, they're now going to face the hefty cost of hiring them back again.

Where they will benefit is that they may be hiring from a larger pool of workers. The IFS suggests that lone parents and older workers are not withdrawing from the labour market as they have in previous recessions, and this may in part be driven by changes to the welfare system.

As a result, workers may be experiencing greater competition for jobs and therefore be willing to accept lower wages.

All of this has again impacted on the young. Benefit cuts, increasing costs of higher education, the reduction in opportunities created by the factors outlined by the IFS: that's a nasty combination.

It's worth remembering that the Coalition's zeal for austerity has hit the older generation far less; witness the winter fuel payments that still wing their way to elderly millionaires. There's a reason for this: older people are both more likely to vote, and more likely to place their X in the Conservative box when they do so.

Such cynicism may come at a price. On one level, it may colour the attitudes of those younger people as they do begin to exercise their franchise.

But there may be far more malign consequences than that as a result of the creation of a vast pool of under-educated, under- employed and uncared-for youth.