Practical ways to raise worker wages in the UK


4:11 pm - July 1st 2013

by Duncan Weldon    


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Today the TUC have published a new Touchstone Pamphlet from Howard Reed & Stewart Lansley. The whole thing can be downloaded here.

This is an important and timely publication. The TUC launched our “Britain Needs a Pay Rise” campaign three weeks ago and as I argued at the time, it is important to remember that Britain’s great wage squeeze predates the financial crisis.

Real wages are currently going through their longest squeeze since the 1870s and living standards have raced up the political agenda. Meanwhile last week’s GDP data suggested the UK’s current recovery is being propped up by a decline in the household savings ratio, rather than income growth.

Our current economic crisis is more than simple crisis of demand. Things started going wrong in the British economy before the crash – and one of those things was wage growth.

Today’s publication is about more than the need for better traditional macroeconomic policy – we do desperately need a fiscal stimulus, but a stimulus along isn’t enough. The aim of policy can’t simply be to return the economy to where it was in circa 2006.

I’ve argued that we need to think about economic reform in terms of changing our national business model. One important aspect of this is looking at how wages are set and how the gains from growth are distributed.

“How to Boost the Wage Share” looks at the practical impact of policies such as raising the national minimum wage, extending the living wage, fuller employment and (crucially) the role of extended collective bargaining through modern wages councils and new sector based institutions.

These policies would have immediate impact on wages, but the report also recognises that alone they are not enough.

Just as crucial in closing the wage gap is:

…a more active industrial strategy aimed at rebalancing the economy towards sectors that can support higher-waged employment.

We have heard a lot in recent months about the concept the ‘predistribution’, I think of this pamphlet as a guide to practical predistribution policies and strongly recommend taking a look at it.

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About the author
Duncan is a regular contributor. He has worked as an economist at the Bank of England, in fund management and at the Labour Party. He is a Senior Policy Officer at the TUC’s Economic and Social Affairs Department.
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Reader comments


“…a more active industrial strategy aimed at rebalancing the economy towards sectors that can support higher-waged employment.”

If we had some eggs, we could have eggs and bacon. If we had some bacon.

PS you do know that financial services is one such sector!

2. mylastpostwaseliminated

Why raise wages and put yourself out of a job?

Kick all the vested interest pocket filling politicians out they keep house prices higher than people can afford. Nowhere else in the World have they stayed this high so there is hidden, deliberate intervention by Westminster!

Yes those bent, en_titled, parasites at Westminster with multiple BTL properties who use Billions of pounds per year in hidden public subsidy given to THE CITY (bankers) who cannot afford to see house prices drop.

The neg equity would wipe the banks out again and take away the elites thieving mechanisms hidden in the finance industry.

Allowing house prices to drop to something a new generation can afford with massive Uni debts in tow and huge subsidies on energy bills to keep the filthy rich wealthy would require them to come down to 2x Single Wage

3. mylastpostwaseliminated

The grah at the top of te page shows perfectly when

A. Workers wages were dismantled from productivity rises.
The elites offshored the excess wealth, hidden from public view, whilst giving out ‘token’ wage rises which quickly fell behind huge productivity rises something like 70% gap between productivity and wage rise.

The proof in the pudding is “The enablers” Financial thieves in the City and Company Directors (in the know – demanding “Golden parachutes” for failure etc) wages rose 1000’s of times higher than ordinary plebs.

If your wages hadn’t been dislocated from productivity we would all roughly be paid Twice our present annual wage!

Conned by the elites!

B. The rapid demise in wages started exactly around the time the elites and their Govt puppets started attacking and wiping out protest thru strong Unions. (the public voice – but undermined by Govt placed stooges to make crazy demands designed to lose public respect)

They basically OUT-LAWED them with new laws designed to hinder in every way and intimidate (strike) leaders with huge personal punishments for any dissent

“Just as crucial in closing the wage gap is:

…a more active industrial strategy aimed at rebalancing the economy towards sectors that can support higher-waged employment.”

Well I’m glad it’s in there at all. But in reality it’s by far the most important point. With mass immigration constantly expanding the low end of the labour force you’re never going to get high wages for low skilled labour. It’s just a fantasy to think otherwise.

Try this in the news on 1 July:

Graduate recruitment at highest level since 2008
Survey finds 4.6% increase in hiring, but median graduate starting salary remains unchanged

Overall, graduate hiring rose in nine out of 13 sectors, including the law, investment banking and accountancy, marking a recovery from the depths of the recession, which produced declines of 18% in 2009 and 6.7% in 2008.
http://www.guardian.co.uk/education/2013/jul/01/graduate-recruitment-survey

Of course, that news won’t be encouraging for the 900,000 or so 16-24 year olds who aren’t in employment, education or training and for those 16 year-olds who can’t manage to achieve those 5 GCSEs A*-C grades, including maths and English, to make into university.

“London schools have improved so rapidly over the past 10 years that even children in the city’s poorest neighbourhoods can expect to do better than the average pupil living outside the capital” [Financial Times 13 January 2013]

6. Man on the Clapham Omnibus

It is predictable perhaps that capitalist elements such as trade unions will look for growth and redistributive methods to bring about betterment of their members.
But there is a bigger issue which in my opinion needs to be addressed at least alongside all of this.
We live in a world that is running out of exploitable Oil/Gas and Nuclear fuels. Added to that are the issues associated with global warming,drought,escalating food costs political instability.
The concept that capitalism is in someway business as usual is IMO a little far fetched. Rather, global capitalism is and has been like a cancer sucking in (and spitting out )resources as it goes along.The problem is its running out of resources.
The global agribusiness has removed about a fifth of cultivatable land from the world and is current destroying more as we speak.Growing monocultures might make sense for a mechanised process of food production but it wrecks topsoil and exponentially requires more and more fertilizer just to stay still.GMO just makes it all far worse.
It takes 7 times more calories( from predominantly oil) to produce 1 calory of food. 30% of your average box of kellogs is the oil cost of fertilizer. With oil costs rising as they surely will, life as we know it,economically is unsustainable.

In the face of what will be dismal reading from the IPCC in September and in the face of relentess growth in world population an alternative economic system is not only desirable ;it is inevitable. It will be localised and sustainable but will require much lower populations to survive.

In the interim, the oil conglomerates, the agribusiness the elites and the security state that supports principally US hegemony will plod on shrouded in the ideology of denial (dont disrupt the markets whatever you do!) until its inevitable collapse.

In this context the unions are merely stuck in the same aspic as are all the political institutions and the economies that support them.

One good plan is to revive self sustainable agriculture in this Country for a start.

One persuasive reason for sticking with variations on regulated market capitalism is that the alternatives – on their historic records – have done so much worse.

The process of experimentally switching from one system of allocating resources between competing uses to a radically different system has usually turned out to be seriously disruptive and rather socially painful. As Lenin was wont to put it: You can’t make an omelette without breaking eggs.

IMO it would be illuminating to compare what has happened to the share of wages in Britain’s national income with that in peer-group countries. The bankers, financial services and professional footballers apart, one possible explanation is that the premium for scarce skills has increased – hence the present surge in jobs for graduates – while the earnings of those with low skills has been depressed by better educated and motivated immigrants from eastern and central European countries. A recap from the BBC website in May 2011:

The number of low-skilled workers born outside the UK more than doubled between 2002 and 2011, according to the Office for National Statistics.

The figures show that almost 20% of low-skilled jobs are held by workers born abroad, up from 9% in 2002.

Workers coming to the UK from eastern or central European countries were the biggest single factor in the rise.
http://www.bbc.co.uk/news/uk-13561094

One of the obvious policy implications is the need to boost schooling standards up to the outstanding London attainment and to create better opportunities for training in workplace vocational skills.

This recent news report in the FT is another insight into why wages in Britain are currently depressed:

Output per hour worked fell 1.9 per cent in the first quarter of this year compared with a year earlier, indicating that the UK’s poor productivity performance since the recession of 2008-09 remains slow to improve.
http://www.ft.com/cms/s/0/32f8034c-dfd0-11e2-bf9d-00144feab7de.html#axzz2Xu7ImWRD

Arguably, it would be more timely to debate how to improve productivity.

9. mylastpostwaseliminated

@ Post 6

I enjoy most of your posts but you’ve gone into brainwashed mode in parts about oil.

No country has EVER released true figures of their ‘known reserves’

This is so the elites and their ‘enablers’ in the City can play around with oil prices like water creating fake shortages eg holding tankers at anchor in Blitish Channel (yes they do!) to push/manipulate the prices up.

This only benefits the uber rich Banker-investors and Trader Bonuses at end of year – whilst screwing the general population.

Let me repeat

NO COUNTRY IN THE WORLD HAS EVER RELEASED TRUE KNOWN RESERVES OF OIL

– therefore anything you read/hear in the Media has been based on pure SPECULATION and is manipulating propaganda by the elites (making Billions from corrupt practises)

US for instance has just ‘upped’ oil production from 5 Billion barrels to over 11 Billion Barrels!

Energy costs have fallen rapidly – therefore I hope oil product costs will fall too.

For international comparisons of the shares of wages in national incomes, try this ILO study: Why have wage shares fallen:
http://www.ilo.org/wcmsp5/groups/public/—ed_protect/—protrav/—travail/documents/publication/wcms_202352.pdf

On the evidence, many peer-group countries have also experienced falling wage shares, which suggests that this is not a peculiarly British phenomenon but that there are common market forces at work in relatively affluent market economies.

Duncan,

You’re making the same damn mistake that Reed and Lansley have been making all along. A mistake that has been repeated so often that it’s becoming a lie.

You’ll note that the profit share used in the paper and the wages share do not sum to 100.

This is because there are other components in GDP when measured by the income approach. Specifically, there’s taxes and subsidies on consumption. The largest part of which is VAT. Which has, as you know,m risen substantially over the years and decades.

The labour share has fallen more than the profit share has risen (indeed, the profit share’s around and about the long term average). The difference is the rise in VAT.

You know this, Reed and Lansley know this, so why are you continuing to use these known to be wrong explanations?

12. Man on the Clapham Omnibus

9. mylastpostwaseliminated

Not quite sure what you are saying here.

I agree that the only real time oil industry guide/best guess is contained in a document costing $32000 a copy, but there are plenty of anaysts out there with informed opinion and evidence. Plus the fact you can tell when a well runs dry for obvious reasons.

There are also plenty of government reports milling about such as those expressing the then concern of the US neocon Government under Bush which was highly represented by ex oil personnel. As Chainey subsequently admitted the Iraq war was in part about the perceived shortfall in reserves. This was at a time when the US were experiencing blackouts
Additional Afganistan is in the process of being secured and that has huge oil fields as well as a permanent US presence.

Blair is also touring Asia’s torture States( Turkmenistan etc )giving them PR lessons (maybe like ‘try not to electrocute people within screaming distance of visiting dignitaries’) and Cameron is visiting behind him to sign up lucrative oil deals. What Blair hasnt sorted, the CIA has by supporting puppet Presidents by wads of dollars and plenty of tear gas and riot gear.

So we may conclude that the future’s bright, the future’s ..er..black! Sadly not quite.

Emerging nations such as China and India will start (are!) sucking up resources and with population growth the discovery/exploitation rate is just not keeping up with demand. That plus more than half of the worlds biggest wells are past their peak in production.

So oil like gas is a finite resource. It is also a commodity to be speculated on which is why forecasts of future capacity is largely over estimated.

No-one in the industry is gonna talk gas and oil reserves down but it does become a bit indicative if they start fracking in grannies back yard just to keep things ticking over.Same goes for Tar sands, which unfortunately, has found its self uneconomic all of a sudden,a situation that wont be helped if Obahma ditches the XL pipeline.

Its worth bearing in mind that without oil we will be back to the 1800’s with all that brings. Food production will have to be localised,cities as we know them will dramtically alter and large populations will be unsupportable. Anything remotely connected with oil such as plastics to pesticides will be long gone.It goes without saying that the car will be long gone as a generalised form of transport.

Thats why anyone sensible would start to wean themselves off the stuff in a measured and calculated way and move to sustainable methods of generation. Instead itseems the US/UK is hell bent in getting as much for itself as it can. War making stuff me thinks.

13. Man on the Clapham Omnibus

7. Bob B

One persuasive reason for sticking with variations on regulated market capitalism is that the alternatives…

Couldnt agree more. I’m no communist – in fact I am not even political! But a systems analysis would suggest that we didnt chose the 2008 meltdown or black friday or anything else for that matter. We sort of chose to go ‘the shops’ and to ‘work’ but thats about it. We do not get to choose the form of commerce or whats on offer or the form of work we undertake. We neither chose what we say since pretty much all of it comes from someone else and we rarely get a say in the political leaders/ manifestos or political parties on offer. They are part of a macro world.
Even here, Sunny and his mates trudge out some low level drivil and we remorselessly start heading for the trough.

Similarly, the economic system,although staffed by individuals, runs by its own autonomous logic and that logic will determine the kind of system we will end up with.

Competitative capitalism amongst equal nations – not a chance. I doubt even competitve capitalism in the UK

14. mylastpostwaseliminated

Fun

Here’s something to think about re alternative energy.

New inventions/ideas have to be passed thru elite-controlled “peer review system” to get “666(=off)icial recommendation” by uber-corrupt elite shills before general release into Global scientific mags.
(If you know the Masonic-Zionist meaning of ‘EE’ good for you”)

This is how they control, buyout or kill an idea/inventor dead it if threatens the Zionists/crony corporations stranglehold over energy/products etc.

A reasonably recent one was somebody invented some scratch proof carpaint. He was immediately bought out by the car industry and we have never seen it released!

The elites destroyed and bankrupted TESLA to crush his inventions so they could mis-lead us about free-energy from Magnetic energy inventions and deliberately give us the wrong principles of how electric/magnetic energy works.

Loads of magnetic principle research is still deliberately left by the elites as “unexplained”
(Just like they collect and store all the Papyrus found in Egypt whilst no funding is given to decipher the written words!! (Deliberate destruction of knowledge path to bring about a false-satanic-global-religion)

The elites took Billions of Taxpayer pounds, dollars etc and set up a hidden knowledge network thru University links.

These have been deliberately shifted onto hidden network nodes so forced-payment public can no longer access the networks THEY were made to pay for.

Increasingly, only elites kids get to top Uni’s as everyone else is ‘priced out’ of the picture.

“Chainey subsequently admitted the Iraq war was in part about the perceived shortfall in reserves.”

That’s what they like you to think!
What really happened was an attack on Saddams/Iraqs huge Gold Stash!!
Remember he demanded payments in gold bars for oil sales – this takes away elite-zionist control of money supply, flogging us with worthless, “unbacked” pieces of paper dollars/pounds/Euros etc!)
The gold was quietly spirited away by the zionists and hidden in Fort Knox – whilst they printed up flew in hundreds of huge pallets of worthless paper dollars.

See where I an getting at?

15. glynnisdulyn

I’d rather hoped this article would be about the TUC Pamphlet. Instead we get the usual right wing, class traitor journo mantra of “if the workers will just suffer quietly, then their superiors will make it all better.

16. mylastpostwaseliminated

Just remembered another GOLD example!

As soon as IRAN mentioned (last year) they wanted all oil payments in Gold bars, The US/UK/other sent aircraft carriers, missile ships, destroyers to go and sabre rattle off Iran’s coast

– can’t be more blatant than that if you suss why they are doing it!! ROTHSCHILD orders

17. Man on the Clapham Omnibus

15. glynnisdulyn

if you think the monied classes are going to willing redistribute to the likes of the unions you must be bonkers.

Average wages dropped 2% bankers bonus up 28%

Get in the real world

18. Man on the Clapham Omnibus

16. mylastpostwaseliminated

they shouldnt have let you out!

19. Man on the Clapham Omnibus

14. mylastpostwaseliminated

I invented a scratch proof flea once.

After a bit I squashed the idea!

20. mylastpostwaseliminated

@ omni-bust

“Its worth bearing in mind that without oil we will be back to the 1800?s with all that brings”

Ah yes
– promissory bank notes which you could cash in for real gold at the Bank!

Bank owners ‘personally liable’ for ALL DEBTS – to the point of personal ruin.

Coins made of real, copper,silver and Gold (not debased worthless alloy)

Bank owners could not overlend up to 50x what was in the bank
(cos everything had to balance against the stack of real wealth-Gold in their safe)
for the con of putting Mortgage borrowing sky-high after brainwashing populations to borrow up to 10x their stupid salary!

Sterling Silver accepted as trusted legal tender by merchants all over Europe and beyond

etc etc

Them ‘ole days – eh!

21. Man on the Clapham Omnibus

20. mylastpostwaseliminated

No what I had in mind was limited energy supplies, virtually no transport, limited production, limited local food supplies
Declining population.

Man on Clapham omnibus: “Competitative capitalism amongst equal nations – not a chance. I doubt even competitve capitalism in the UK”

According to OECD estimates, around the start of the 19th century, the economy of China was producing about a quarter of the world’s GDP. At the beginning of the 20th century, Agentina was one of the most aflluent countries in the world in terms of per capita GDP. But things happen and all that changed. Schumpeter called it the “gale of creative destruction”.

The OFT has been going on for years about introducing more competition into banking services in Britain.

“The Financial Times has examined what has happened since the crisis to the payrolls of 13 global financial institutions – expressed as a proportion of pay plus net profits (including those distributed as dividends). This approach allows you to see how the ‘cake’ has been shared out between employees and shareholders.

“What the analysis shows is that the lion’s share has been taken home by the bankers in the form of pay and bonuses, rather than paid out to investors or left in the business to support lending activity. The part represented by payroll has on average gone up from 58 per cent in 2006 to 84 per cent last year. Meanwhile, the share accounted for by dividends has slumped by two-thirds – from 15 per cent to just 5 per cent. . . Banks’ return on assets – an unleveraged measure of performance – has barely changed in decades.” [Financial Times 5 June 2012]

immigration = supply and demand

It’s not the only thing but ignoring it as a factor makes you look irrelevant.

Bubble

Recap this from the BBC website in May 2011:

The number of low-skilled workers born outside the UK more than doubled between 2002 and 2011, according to the Office for National Statistics.

The figures show that almost 20% of low-skilled jobs are held by workers born abroad, up from 9% in 2002.

Workers coming to the UK from eastern or central European countries were the biggest single factor in the rise.
http://www.bbc.co.uk/news/uk-13561094


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