Rise of City 'has cost workers £7,000 a year' says TUC

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The Independent Online

The City's relentless rise has sucked £7,000 a year from the pockets of the average British worker, a report from the TUC will reveal today.

The report Where Have All the Wages Gone? found that over the last 30 years the share of national income going to wages has fallen from 59 to 53 per cent. But over the same period the proportion of GDP going to profits has increased from 25 to 29 per cent, while the share of income spent on taxes and subsidies has been broadly consistent at around 11 per cent.

This means that the average Briton failed to share in the country's economic success before the financial crisis, losing out on £7,000 in lost earnings on average.

The report was produced using official statistics by Howard Reed, founder of Landman Economics, and Jacob Himmelweit, a fellow at the New Economics Foundation.

It blames the decline of industries that spend a high proportion of turnover on wages, such as manufacturing, and the expansion of new industries that have a far higher profit margin, such as financial services, for the figures.

Where Have All the Wages Gone? also concludes that the entirety of the rising profit share across the economy has gone to just one industry – financial services – which has increased its share of total UK profits from 1 per cent in 1980 to 15 per cent today.

The TUC argues that the success of financial services and the City has come at the expense of both workers and other industries, which failed to benefit from the economy doubling in size since the late 1970s.

It calls for more effort to diversify Britain's economy away from the City, particularly given the effect of the financial crisis, which forced the Government to inject up to £1 trillion into the banking sector to keep it afloat.

The report also looks at the wider economic consequences of the changes in the wage and profit share within GDP. Falling wages, it argues, have increased inequality and led to rising personal debt.

It says that since 1975 business investment, and since the mid-1980s spending on research and development, have been falling.