How to end an endless argument

The longstanding debate between reader JohnH and virtually anyone else on this website is about (1) UK inflation in 2015 and (2) real wages, with JohnH citing various documents. I thought it would be useful to GET THE DATA YOURSELF to resolve the issue. Below are three graphs of consumer price levels, annual inflation, and deflated CPI wages.

Figure 1: UK CPI (blue), HICP (brown) on a logarithmic scale. Source: ONS, Eurostat via FRED. Light green fill indicates 2015M01-2015M12.

Both CPI and HICP are higher in 2015M12 than in 2014M12. The same information can be seen in a different way by looking at the annual inflation figures for 2015M12.

Figure 2: UK consumer price inflation year on year (blue), HICP inflation (tan). Source: ONS, Eurostat via FRED. Light green fill indicates 2015M01-2015M12.

Annualized inflation in 2015 was 0.5% (using CPI) and 0.2% (using HICP).

Thus, year-on-year inflation was not zero or negative in 2015, although individual months could record negative am/m.

What about real wages? I use the OECD average private sector hourly earnings (2015 = 100), and

Figure 3: United Kingdom Average hourly earnings in the private sector (2015 = 100) deflated by CPI on a logarithmic scale. Source: ONS, via FRED, OECD and author’s calculations. Light green fill indicates 2015M01-2015M12.

Average real wages increased in 2015 from 98.4 in 2014M12 to 100.1 in 2015M12, or by 1.6% in logarithmic terms.

I would venture to suggest that real wages have risen because the output gap has almost halved from 2014 to 2015 (according to the latest IMF WEO estimates). Note that inflation was much higher in 2016 (1.8% CPI y/y) and real wages rose by 1.3%.

While real wages did rise in 2015, ignoring a longer period of data could mean growth can be taken out of context. Here are real wages for the period spanning the start of Cameron’s austerity measures.

Figure 4: United Kingdom Average hourly earnings in the private sector (2015 = 100) deflated by CPI on a logarithmic scale. Source: ONS, via FRED, OECD and author’s calculations. Light green fill indicates 2015M01-2015M12. Red dotted line for June 2010 (Osborne’s budget speech).

By the end of 2015, real wages were down 1% from the announcement of specific austerity measures in June 2010.

Conclusion: Instead of endlessly quoting numbers (for example, from the year to September), look at the damn numbers themselves. You can find almost everything you need in one of the sources listed on this blog. “Collection of Data Sources [Updated]”.

Also, for median wages, earnings, etc. that JohnH couldn’t find before, see this mail.