The TUC laments that the workers' wages have fallen

The TUC tells us that wages have fallen in recent years:

Workers in the UK saw their wages fall by 1% a year in the period following the financial crisis, putting the country in 103rd place in a global ranking of pay growth compiled by the TUC.

The trade union umbrella body said wages rose in many parts of the world between 2008 and 2015, but average pay in the UK fell once the impact of inflation was taken into account.

Well, yes, no one's very happy about it but that is what happens in a recession. It's also nothing at all to do with the financial crisis - however much that might have led to the recession.

For what is really going on in a recession is that wages are ahead of productivity. It therefore doesn't make sense for people to employ workers - the value of their output is less than the cost of employing them. This is true whatever the cause of the recession. And the solution is entirely obvious, wages must fall relative to the value of the output. That is, a fall in real wages.

Again, no one likes this but it is the solution. We can do it by lowering nominal wages but as Keynes rightly pointed out people don't like this. The internal devaluation of Greece is a harsh, harsh, thing. We can also do it by a bit of inflation, nominal wages are static or even rise, real wages fall and we're less grumpy about it because we are prey to the money illusion.

But it is still true that the solution for labour being too expensive to employ is for labour to become less expensive.

And we even have managed to construct a labour system which does this with minimal pain. Back at the start of the troubles there were predictions that unemployment would rise to 4 or even 5 million. Mass unemployment being another way in which real wages get screwed down. This didn't happen - and it didn't happen because we now have a labour system flexible enough that real wages, when necessary and unfortunately, can and will fall without imposing that sort of pain.

Contrary to the bleating here from the TUC this past decade has been a massive triumph of the British system as it is. We've managed to build a system where the outcome of the largest recession in near a century is a mild decline in real wages rather than mass unemployment. This is what success looks like.