Scottish workers are paying catch-up

garage workers Image copyright Thinkstock

The Scottish economy has been doing a lot of catching up with the rest of the UK in the past 20 or so years. It closed the gap in growth of economic output, in employment and unemployment, and now, we learn, in pay as well.

The Resolution Foundation report does not spell out the reasons why median pay has caught up and surpassed that of the middle-earning English worker, but there are some likely explanations.

Coming out of industrial decline, and a relatively poor rural sector going back generations, the economy benefited from foreign companies' investment with highly productive plants, relatively strong education and skills, and the growth of the finance and energy sectors.

The figures also reflect that most people in England live outside London and the south-east, and face a lower-paid, lower-skilled labour market than the capital, and closer to that of Scotland.

Why, then, did pay not fall as fast as it did in England when the financial crash happened, and then rose faster?

We cannot be sure of that either, but among the possible explanations: Scotland has a slightly higher proportion of public sector workers, who retained their pay levels through the toughest years of pay cuts for the private sector.

'Sacrifices required'

Scotland also has a higher level of trade union membership, which could explain the sharper drop in English pay, with fewer union reps and more sacrifices required of private sector workers.

While the most recent figures in this report show an 8 pence per hour Scottish pay premium for the median worker, they do not reflect on the past few months.

Other economic indicators show the Scottish economy has been diverging from the rest of the UK, with unemployment higher and growth significantly slower.

The oil and gas sector, which saw strong wage growth in the recent boom years for investment, is now seeing sharp cost-cutting, of both pay and jobs, as the plunge in oil price has hit the industry hard.

A tight labour market (giving workers more bargaining power) and strong productivity growth (meaning workers are adding more value per hour) are the key factors for raising pay.

Scotland has been having problems with both, so we cannot be sure that the 8 pence pay premium is still tipped in Scotland's favour at the start of 2016.

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