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The last few days has thrown up three pieces of information about the UK economy – combined they seem to tell a story that is impossible.

Jobs

For UK plc. I have good news on jobs. UK employment has risen to its highest level ever recorded. In the three months to May, UK employment stood at 32.01 million, or 74.9 per cent of the population aged between 16 and 64. It has never been higher, with data going back to 1971.

Unemployment stood at 4.5 per cent, the lowest level since 1975.

Wages

During the same period, real average weekly wages excluding bonuses fell 0.5 per cent, while real average wages including bonuses fell by 0.7 per cent.

It turns out that the last ten years has been the worse ten-year period of earnings growth in 150 years, so an extrapolation of data contained in the Bank of England report – Three centuries of data – would suggest.

Productivity

As for growth in productivity, that’s output per hour worked, this is now at its lowest since 1893.

The odd trinity

And that’s the UK in 2017 – record employment, yet minimum wage jobs seem to dominate. Because median wages are so low, tax receipts are not as great as you might expect given the levels of employment, and so government borrowing is still up there in the stratosphere.

Economic theory says there is a trade-off between wage inflation and unemployment. Economists call it the Phillips Curve. The relationship no longer seems to work, indeed it seems that low wage growth is the price we are paying for full employment.

It is not dissimilar in the US – unemployment is similarly low, wage growth is lacklustre, productivity growth minimal.

How can it be?

Robert Gordon, the economist at North Western University suggests that it is down to a slow-down in the rate of innovation – that technological progress is not like it used to be. Many people, especially those who work with technology, react in incredulity to such a theory.

Another possibility is that we are seeing the emergence of an ABBA economy – the winner takes it all. We are seeing a small number of highly productive companies dominate their market places. These companies are massively profitable, have huge cash reserves, but are not great employers.

Because such a large chunk of the GDP cake is taken up by such a small number of companies, we see a surplus of labour, pushing down on wages.

An ultra-flexible labour market, exemplified by the gig economy, may be part of the problem.

It is clear, that what the UK, and maybe the US, need is more investment among companies, creating higher productivity, making higher wages possible.

What can be done?

Maybe the government can start by paying public sector workers more, after-all the private sector and public sector are in competition for the same labour force.

Maybe the answer is a rise in the minimum wage.

Entrepreneurs can do their bit too, by discovering niches, finding new parts of the business long tail, and through driving innovation.