Life at the bottom… 10 years on
Life at the bottom
Almost a decade after the collapse of Lehman Brothers living standards for many across the West have yet to return to pre-crisis levels. The initial instability of the post-crash years has subsided, but while the ship has been steadied electorates in several countries feel that politics is headed in the wrong direction.
In Britain attitudes toward austerity have reversed in recent years, with a majority now wanting more spending on public services. In 2010 three quarters of the British public backed spending cuts over tax rises1. By 2017, 48 per cent people backed higher tax and more spending, up from 32 per cent in 20102.
A sea change in attitudes is afoot in the United States and Europe, too. In the final year of President Obama’s term in office, more than two thirds of Americans believed their country was moving in the wrong direction3. Meanwhile five in 10 Europeans described the economic situation in their country as bad in 2015, according to the respected Pew Research Centre, while a substantial majority (64 per cent) believed children growing up today would be worse off than their parents4.
The political reverberations of shifting attitudes have been felt in several countries. It is no coincidence that insurgent parties and candidates – Marine Le Pen in France, Donald Trump in the United States, as well as Jeremy Corbyn in Britain and Podemos in Spain respectively – have in recent elections run on protectionist economic platforms committed to expanding the state.
This political turmoil is sustaining itself on feelings of dissatisfaction with the status quo, dissatisfaction built on a lack of opportunity and the destruction by globalisation of older ways of life. Large numbers of people in the West no longer expect life to get incrementally better year on year, and a decade on from the crash life remains a struggle for many.
Public sector workers have faced a sustained squeeze on wages
Since 2010 public sector workers in Britain have felt a tight squeeze on their pay packets, with a year-on-year freeze of 1 per cent (below inflation) wage increases. School teachers have seen a fall in their median real earnings from £25 an hour in 2005 to £22 an hour in 2015, while family doctors experienced a median real earnings drop from £38 an hour in 2005 to £30 in 20151.
In France, civil servants had their pay frozen for six years from 2010, until Francois Hollande sought in 2016 to quell anger on the left directed at his government’s pro-business reforms by offering a 1.2 per cent increase2. Spanish public sector workers had their pay frozen in 2010 as recession swept the country after the implosion of the vertiginous construction boom. As the Spanish economy has gradually recovered, public sector workers have been promised a 1 per cent pay rise this year – though inflation in the country still sits at 1.5 per cent3.
Public sector workers in the US have been put under the cosh in recent years as collective bargaining for public employees has been dramatically curtailed in some states. In 2011, Republican Governor Scott Walker passed Act 10 in Wisconsin, requiring public sector unions to win the support of a majority of employees in a specific bargaining unit – not just voting overall – in order to go on strike. Since Act 10 was introduced, membership of the MTEA teachers’ union has fallen by 30 per cent4. Walker also introduced a “right-to-work” law, which bars labour contracts that require workers to pay union fees.
Working class men are being left behind by globalisation
The outsourcing of well-paid manufacturing jobs to places like China and Latin America has cut adrift many working-class towns in both Europe and North America. Coal mines, power stations and production lines have been replaced over recent decades by call centres, supermarket checkouts and non-unionised or automated warehouse work, providing fewer opportunities for those without formal qualifications.
In the US, manufacturing and agriculture employed one in three American workers in 1947. By 2012 it was just one in eight1. This has hit some areas particularly hard. Between 1950 and 2000, the share of US manufacturing employment in the so-called Rust Belt – former industrial areas stretching from the Great Lakes to the upper Midwest States – fell from more than half to around one third2.
Areas of Britain are beset by similar challenges. Apart from Telford, a 1960s new town, Britain’s fastest growing cities between 1981 and 2013 were all in southern England. Its fastest shrinking towns were all in the north.3 The jobless rate in the North East in 2016 was the highest in the UK.4
So-called “left behind” voters – typically older working-class men – have attracted the attention of journalists and politicians in recent years due to their willingness to abandon the liberal status quo. Donald Trump won 67 per cent of America’s white workers without a college degree5 during his victorious presidential campaign of 2016. In France, the same demographic made up a significant chunk of support for the National Front’s Marine Le Pen during recent elections. According to analysis by Reuters, in the first round of the French presidential election, for each 1,000-euro drop in the median income in a given area Le Pen scored nearly two extra percentage points6. In Britain, older working-class men who left school at 16 were more likely to back Brexit than university educated city-dwellers7.
Many struggle to get on the property ladder
In the UK income inequality has narrowed slightly in recent years. However this has masked a growing inequality between those with and without assets to their name. After a short lull, house price inflation has accelerated again in recent years, making it difficult for young first-time buyers to get onto the property ladder. The average property in Britain is now worth £299,000, meaning a first-time buyer needs to find an average deposit of £23,000 to buy a home, according to figures published in 20171.
This trend is predictably pushing overall home ownership downwards. Home ownership fell to its lowest level in 30 years in 20172, the fourth lowest ownership rate in the European Union3. Since 2002, high prices, weak income growth and stricter lending policies have put home ownership out of reach for many. Seven in 10 British homes were owner-occupied at the turn of the century, and that figure had fallen by the end of 2016 to 64 per cent4.
Spain’s housing market was hit particularly badly during the recession years. At its peak in 2008, a property boom saw the country building more houses than Germany, France and the UK put together5. Since the crash more and more young Spaniards are choosing to rent. According to Eurostat, the EU statistics office, the proportion of Spaniards renting a home has risen to 22 per cent from 19 per cent in the decade since 2007.
There is also evidence that quantitative easing – a policy where new electronic money is created to increase private sector spending and bring inflation to its target level – widened wealth inequality by boosting the prices of financial assets owned disproportionately by the better-off. A recent study by economists at the University of Chicago and the Federal Reserve Bank of New York found that American metropolitan areas hit hardest by the recession received the least in monetary stimulus from quantitative easing6.
The young are struggling to find work
Youth unemployment (among those aged 15 to 24) across the Eurozone sits at 21.2 per cent. Yet this figure conceals large variations between countries1. Overall unemployment in Spain is currently 22 per cent, the second-highest in the Eurozone after Greece, with youth unemployment in Spain at 41.5 per cent2. In the Spanish province of Granada, police have linked a huge rise in home-grown cannabis production to high levels of unemployment, as people turn to whatever they can to make ends meet3.
Youth unemployment in France reached a record high of 25.7 at the end of 2012, but has gradually fallen since, and in May of this year was down to 21.9 per cent4. Concentrated pockets of unemployment are typically reflected in levels of poverty in the country. In La Grande Borne, the French suburb home to Amedy Coulibaly – the man who murdered four people and a policeman during the siege of a kosher supermarket in 2015 – half of the 13,000 residents live below the poverty line5.
Portugal, which introduced one of the largest austerity packages during the country’s worst recession in a generation, saw youth unemployment rise to a record high of 40 per cent in early 20136. That figure has fallen to 24 per cent as the economy has showed signs of a return to steady growth, aided by strong exports and tourism.
Greece has been the country worst hit by mass unemployment, however. Youth joblessness among Greeks remained at 45 per cent in April 2017, down from a record high of 60 per cent in March 20137.
Young people in Britain face a different set of problems. The labour market in the UK has remained buoyant in recent years. At 4.7 per cent, UK unemployment is at its lowest level since 1975. Yet the British economy has become increasingly bottom-heavy, with a high proportion of the jobs created since the crisis concentrated in low-paying areas of the economy such as the service sector.
Which brings us to…
Work is characterised by insecurity
There has been growth in Britain in recent years in precarious, low-paid employment. Many British workers have also seen a fall in earnings because they are unable to find regular full-time hours. According to the Institute for Fiscal Studies, men on low pay are four times more likely to work part-time than 20 years ago1. The number of people in Britain on zero-hours contracts reached almost one million in 2016. In the US, middle-class wages have been relatively stagnant since the 1970s.
The rise in precarity has coincided with the growth of casual, app-based work. More than a million people now work in the so-called gig economy in Britain2. This encompasses professional occupations such as journalism and the creative industries, but also work undertaken via apps like Uber and Deliveroo (as of 2017, there were 40,000 Uber drivers in London alone). While offering new opportunities for people to work more flexibly, “gigs” typically come with few of the entitlements enjoyed by salaried employees, such as the right to a minimum wage and annual leave.
Gig companies like Uber have clashed with regulators in Europe and the US because of what some have called the “bogus” self-employment status of those using the ride-hailing apps to find work. Gig companies have also clashed with established firms who have then lobbied regulators to act against them. Uber was banned by the authorities in Italy after a court in Rome ruled that the tech company represented unfair competition to traditional taxis. Uber was also forced to pull out of Denmark after taxi meters were made mandatory in the country.
Students are restless - and becoming politicised
In Britain, a rise in student debt over recent years has coincided with a sense that many of the promises made to attract people to university in the good years have not materialised. A recent survey found that a quarter of British university graduates remained low earners a decade after graduating1.
Students across Europe and America have become increasingly politicised since the financial crisis of 2008, with a variety of activist groups appearing (and sometimes disappearing) rapidly. Occupy Wall Street began life in September 2011 in Zuccotti Park in New York, sparked by indignation at government bailouts of the big American banks. In Spain in 2011 the anti-austerity Indignados movement gathered for the first time in Madrid, and would be the precursor to the left-wing Podemos party, formed in January 2014. Podemos would go on to win 21.2 per cent of the vote and 71 seats at the 2016 Spanish general election.
Large student protests against the trebling of university tuition fees for those starting courses in 2012 brought central London to a standstill in late 2010. Student voters have also played an important subsequent role in denying Conservative Party leader Theresa May an overall majority at the June 2017 general election. Beginning her electoral campaign with a lead of 20 points over her Labour rival Jeremy Corbyn, May watched the lead slip away during the campaign, partly as a consequence of Labour’s popular pledge to abolish tuition fees.
Women have been disproportionately hit by downturn
During the recession years women have been hit particularly hard because of their concentration in part-time work and the public sector. 84 per cent of care workers in Britain are women, according to official government figures1. Sectors like social care are funded by cash-strapped councils which have seen their budgets cut dramatically since 2010.
A reduction in the size of the public sector has also hit women across Europe. In 2011, women made up 72 per cent of the public sector in Ireland, 54 per cent in Spain and 63 per cent in Latvia2. Austerity packages introduced in all three countries have seen thousands of public sector jobs disappear. Latvia slashed 20 per cent of its public sector workforce between 2008 and 2010, while Ireland and Spain reduced theirs respectively by 3.6 per cent and 7 per cent.
The lives of minorities have often felt cheap
The Black Lives Matter movement in the United States began in 2013 following the acquittal of the man who fatally shot the African American teenager Trayvon Martin. The movement also sought to highlight wider discrepancies in how racial minorities are treated by the justice system compared to their white counterparts. As well as high-profile shootings bringing the issue to public attention, a January 2015 report published in the Harvard Public Health Review found that black men were far more likely to die in police custody than white men. “The rate ratio for black vs. white men for death due to legal intervention always exceeded 2.5 (median: 4.5),” the report said, “and ranged from 2.6 (95 per cent confidence interval [CI] 2.1, 3.1) in 2001 to 10.1 (95 percent CI 8.7, 11.7) in 1969, with the relative and absolute excess evident in all county income quintiles”1.
Meanwhile research by the American Civil Liberties Union revealed that by 2031 the 2008 crash will have reduced the wealth of median black households by almost $100,000. The RACL predicted that by 2031 black household wealth would be 40 per cent below what it would have been had the recession not occurred, compared to 31 per cent for whites. The difference was based on the fact that more black wealth was tied up in home ownership: home equity for black Americans decreased by 12 per cent between 2007 and 2009, and 9 per cent for whites2.
Despair is driving a drugs epidemic
Parts of the USA and Canada are experiencing something close to an opioid epidemic. At least 2,458 people died in Canada last year of an opioid overdose. According to the federal government 935 fatal overdoses occurred in the province of British Columbia alone, 80 per cent of which were men1. American researchers Anne Case and Angus Deaton found in a ground-breaking 2015 study that middle-aged white Americans had started dying younger in recent years, reversing decades of increased life expectancy. Upon investigating further, the two economists found growing instances of what they called “death by despair”, typically of drugs, alcohol or suicide. The two researchers blamed a lack of decent jobs for non-college educated whites2.
Long-term unemployment in many former manufacturing areas of the UK has resulted in similar persistent and concentrated health problems. In Blaenau Gwent, a depressed former mining county in South Wales, it was reported in 2013 that 10,000 people – one in every six adults – were being prescribed some form of anti-depressant by the NHS3.
Hillbilly Elegy, J.D. Vance, 2016, William Collins.
Revolt on the Right, Robert Ford and Matthew Goodwin, 2015, Routledge.
Politics in a Time of Crisis: Podemos and the Future of Democracy in Europe, Pablo Iglesias and Alexis Tsipras, 2015, Verso.
Another Day in the Death of America, Gary Young, 2017, Guardian Faber Publishing.
Island Story, J.D. Taylor, 2016, Repeater.
And the Weak Suffer What They Must?: Europe, Austerity and the Threat to Global Stability, Yanis Varoufakis, Vintage, 2017.
The Precariat: The New Dangerous Class, Guy Standing, Bloomsbury Academic 2011.
The Rise of the Outsiders: How Mainstream Politics Lost its Way, Steve Richards, Atlantic, 2017.
The Road to Somewhere: The Populist Revolt and the Future of Politics, David Goodhart, Hurst, 2017.
The End of Europe: Demagogues, Dictators and the Coming Dark Age, James Kirchick, Yale University Press, 2017.