IN certain respects the announcement that average earnings have risen by 2.5 per cent over the past year is welcome. It means that wage increases cannot be blamed to any significant extent for driving up the rate of inflation.

Unfortunately, the latest Retail Price Index figure was 4.5 per cent, so what people are, in average terms, earning has not kept pace with the cost of living. Although it is true to say that the old enemy, a wage-price spiral, would be harmful to everyone in the community, that will cut little ice with everyone who reaches the conclusion that they are worse off than they were not so very long ago.

And the picture becomes rather more discouraging for the man in the street when the increasing tax burden is taken into account alongside rising prices. In a nutshell, average disposable income has shrunk.

It is, perhaps, hardly surprising that living standards have gone into decline given the state of the global economy and the knock-on effects here. However, accepting that times are hard is not the same as enjoying hard times, so it is hardly surprising that Islanders are asking what has gone wrong and what happened to the reliably prosperous Jersey that so many once took for granted?

Some, of course, will weather these choppy conditions without difficulty because they are so well off that having to put up with only marginal increases in income amounts to only a minor inconvenience. But those fortunate to be able to shrug off the latest figures should remember that any disparity between the rise in the cost of living and wage rises can be a very different matter for the least well off.

Pensioners, for example, are promised an increase in the States pension, but this will be at the 2.5 per cent level of average earnings rather than in line with inflation.

Meanwhile, if employers have successfully kept the lid on excessive wage claims and employees have been accepting settlements at or significantly below the rate of inflation, it is legitimate to ask if Island business has also been playing its part with due diligence. As those who are coping with earnings that are declining in value in real terms will be aware, prices also play their part in the standard of living equation.