Now we know the UK has the lowest wage growth after Greece, here's how we can fix the productivity problem

Being paid badly means workers feel undervalued and their efforts ignored

Fast food workers protest for higher wages outside a branch of McDonalds in central London (CARL COURT/AFP/Getty Images)

Since the producer of the world’s best feta cheese and vine leaves suffered economic collapse, “We’re not Greece!” is a favourite refrain of world leaders.

Pedro Passos Coelho, the Portuguese Prime Minister, said it when questioned in 2015 over his country’s Euro bailout programme. US President Barack Obama said it in 2011, when asked about how he would fix his economy’s deficit. And, in the run up to the EU referendum, Brexiteers commandeered the phrase when challenged on the predictions of leading economists that a vote to leave the European Union would do terrible things to the British economy.

Well now it’s time to retire the statement, in the UK at least: we are Greece, after all. A report by the Trade Union Congress, based on data collected by the OECD, has revealed that Britain suffered a bigger fall in wages in real terms than any other advanced nation apart from – you guessed it – Greece since the beginning of the financial crisis back in 2007.

If you’re feeling a little lighter of pocket these days, that’s no surprise: real earnings (that is, what the money you are paid is actually worth in the economy in which you are spending it) have dropped by 10 per cent in just under a decade. Over the same period, real wages grew in Poland (by 23 per cent), Germany (14 per cent) and France (11 per cent). The average for OECD nations was 6.7 per cent. And all this is even before we take into account the economic shock of Brexit, and the knock-on effect it will have on average earnings, including redundancies, slashed hours and low rates of pay offered by struggling employers. Yes, we are like Greece – and we are getting left behind.

Welcome to low wage Britain, where Theresa May talks about inequality and social mobility while the cleaners servicing the offices of Her Majesty’s Revenue and Customs end up losing money after their hours were slashed because the same Conservative administration introduces a higher minimum wage without also preventing employers from finding loopholes to avoid it pushing up their bill.

And it’s not a problem that the left has any answers to, either. Owen Smith’s suggestion for tackling zero hours contracts, revealed this week, includes creating a new type of employment contact which sets a specific minimum number of hours – even if it’s just one hour. One hour of work a week; unless that’s for an hour spent in management consulting, that’s not going to cut it.

Ignore, for one moment, the squeals of business leaders and listen instead to the economists, whose job it is to take the long view. Low pay is bad for individuals and it is bad for the economy.

The UK has a productivity problem, and the scourge of low pay is making it worse. Low wage sectors, including retail, food and administration, employ a third of all our workers and account for 23 per cent of our gross value added. But, according to the think tank IPPR, these low wage jobs are 29 per cent less productive than the economy as a whole. The people we pay badly are not contributing as much to our national growth rate as they might.

The IPPR’s study, published earlier this year, does not speculate why this might be, but I’ve got a few simple answers.

Perhaps it’s because living on a low wage expends so much mental energy that could otherwise be better channelled at work or in the community – energy that is gobbled up calculating how to stretch a meagre income to cover the week’s essential outgoings, whether it’s possible to both buy a child a birthday present and cover the winter gas bill, whether it’s worth risking not making non-essential repairs to a car for fear they’ll escalate to the point where repair will become entirely unaffordable, and scrapping the only option.

Perhaps it’s because – while well paid professionals may describe getting other benefits from their achievements at work, such as sense of self-worth and achievement – being paid badly means workers feel undervalued and their efforts ignored. Why should they bust a gut for you, dear employer, when you pay them so little they need benefits to support their family despite living in a household where two adults work full-time?

If a third of the workforce feels their efforts go unrewarded, no wonder the biggest problem for Britain is our sluggish economy. The productivity puzzle isn’t really a puzzle at all.

A survey published by the CBI this week found that the retail sector – another low pay industry – is in freefall after Brexit, losing orders at the fastest pace since the height of the 2009 recession. It’s fair to assume that, even if only in the short term, prices on all consumables are going to rise as we seek bespoke trade deals in a world without the protection of the EU (I tend towards a bleaker perspective that this is a long term trend). With basic living costs rising and real terms wages ever falling, rebuilding our economy isn’t just a matter of negotiating a good trading deal for companies but a good working deal for employees.

Until the economy is rebalanced in favour of those producing the wealth, not just those skimming off the benefits at top, we’ll be stuck with an unproductive economy facing unflattering comparisons to Greece.