We need a fair pay revolution to re-balance the economy

by Amanda Ramsay

The UK needs a wages-led recovery. According to poverty campaigners and researchers at the Joseph Rowntree Foundation the cost of living has gone up by 28% in the last six years, while wages have only gone up by 9%.

This cost of living crisis means bills are rising, often debts too, as many households fight a daily battle to make ends meet, with less and less cloth to cut from each month.

Following the global financial crash, food costs have soared in the UK   with price rises, since the recession started in 2007, ranging from 24%-55%, according to government figures.

Of course, it’s not tough for everybody right now. Statistics from the Trades Union Congress (TUC) show top chief executives earned 45 times the average wage back in 1998, now it is a massive 185 times as much. Such companies’ appear to be able to afford to pay the Living Wage.

It is a false economy for the current government to sit back and stomach low pay, as small disposable income levels suck demand out of our economy, with less money to spend in retail. As Kevin Slocombe of the Communication Workers Union (CWU) told me: ‘The TUC as well as countless economists believe a wages-led recovery is the only logical financial show in town.

“What we need is a new government, with an agenda for change. In May 2015, we have the ballot. We need a Labour government committed to national renewal and regeneration, with well-costed and convincing plans to re-balance the economy.”

Meanwhile, anti-politics messages resonate in a vacuum from the likes of UKIP, with trust in politicians and politics at an all-time low. A MORI survey in 2011 showed startling figures, of only 14% of the public believing politicians to tell the truth. 80% – that’s four in every five people – actively said politicians do not tell the truth.

Smart policies that will put more inflation proofed money into people’s pockets could go some way to restoring faith in the system, such as legislating for fair pay. Next week is Living Wage Week. Labour councillors in Bristol last month voted to adopt a Living Wage. Labour and Co-op Cllr Mark Bradshaw (Bedminster) explains:

“Labour in Bristol has been a consistently strong voice in calling for a Living Wage for Bristol and we are pleased to see that, at last, there is now a firm commitment to introduce this for our workforce this year. The Council is well-placed to give a lead to the wider local economy as both a major employer and service enabler.”

This needs to go further. As Thangam Debbonaire, Labour Prospective Parliamentary Candidate (PPC) for Bristol West, insists:

“Those who work in services the council has contracted out are not covered. Too many people, mainly women, working as cleaners or carers for example, for council funded services, are struggling to get by on less than living wages, plus others in private sector jobs are also suffering.”

Sometimes carers are being paid less than the minimum wage even, when travel costs are excluded.Unison has conducted research out this month that shows how a staggering 93% of councils in England and Wales don’t make it a contractual condition for homecare providers to pay care workers for travel time, according to a Freedom of Information requests. Typically, carers are working for two unpaid hours a day, travelling between homes of those they are paid to care for.

Nationally, a good starting point is prescribed by the Centre for Labour and Social Studies (Class) in a policy paper from Özlem Onaran, Professor of Workforce and Economic Development Policy at the University of Greenwich. That is, to increase the statutory minimum wage, then put processes in place for the incremental increase of minimum wage to the level of a Living Wage, expediting this process through the use of public contracts.

As Prof Onaran explains: “wage stagnation leads to lower demand, and hence potentially lower growth. In the UK, just as in the US, debt accumulation by working people has substituted the lack of wage growth, and maintained consumption in the run up to the crisis. Since 2007, we have seen that this was a fragile and unsustainable model.”

Fair pay, in the form of hourly rates starting at Living Wage levels, sees the current recommended rate at £7.65, outside of the capital, £8.80 in London; rates are independently calculated according to the basic cost of living. A national policy should legislate that a UK national Living Wage rises with inflation and be reassessed annually, with each new financial year.

The answer to re-balancing the economy, paying off the deficit, reviving prosperity and paying for decent public services is surely staring us all in the face, in the form of tax justice. The next British government needs to tackle tax avoidance loop holes. UK and foreign companies like Vodafone, Boots and Microsoft, to name but a few, are reportedly short changing us the public and the Treasury.

One Parliamentary report, from the influential and respected Public Accounts Committee, shows how Treasury officials have missed £35billion in missing tax payments, revealing how Her Majesty’s Revenue and Customs’ (HMRC) focus on pursuing small firms, rather the global giants like Apple and Starbucks.

None of us really know the true figure of lost tax revenue through inadequate corporation tax, through nifty financial foot work, clever accountants, savvy lawyers and clever human resources policies and where they locate head offices; but it would clearly help pay off the deficit, pay for decent public services and pay for public servants.

One journalist recently put a figure as high as £85 billion in “corporate welfare” handouts, alternatively known as tax breaks.

Worst of all, the current Tory Lib Dem Coalition government does not only seem happy to leave many workers on poverty pay, companies are being subsidised out of tax revenues, to top-up stingy pay, to the tune of £25 billion pounds, in the form of tax credits, as well as housing and council tax benefits.

This is clearly a nonsense.

The Living Wage Commission points out the added cost. Children of parents on low pay are less likely to achieve at school compared to their peers, at every stage of their childhood education. These children cannot become statistics of failure and social deprivation. They deserve a better legacy and future.

As one UK academic, recently said on the subject: ‘No one should work full time hours and bring home pay that puts them below the poverty line. No household should have two working parents and still not be able to provide for their children.

“Those people who DO want to work more, to bring in more money, are penalised because the government reduces their benefits. We expect people to work in order to survive, which is right of course, but then when those people want to work, but don’t earn enough to survive, the current system penalises them financially for working harder, it just makes absolutely no sense. De-incentivising work is ludicrous.

The idea from the UK retail consortium suggesting the solution for people to get out of poverty is go for a promotion, simply beggars belief.”

Like humanitarian activist and visionary Martin Luther King Jr before us, Labour campaigners refuse to believe the Bank of Justice is bankrupt.

There is no time to take the sedative of gradual change and as King urged: ‘Now is the time to make real the promises of democracy. Now is the time.’

Amanda Ramsay is a researcher, PhD candidate at the University of Bristol, Labour campaigner and writer, with her first book due out in 2015

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9 Responses to “We need a fair pay revolution to re-balance the economy”

  1. gte says:

    But you’re still going to fuck people with taxes, and steal all their pension contributions leaving debts that cannot be paid.

  2. Tafia says:

    While there is a massive surplus of labour both unemployed and under-employed, while government continues to subsidise wages via tax credits, while government continues to subsidise small enterprises for which there is no demand (such as Empty Shop Initiatives and small business start-up grants) then you are living in cloud-cuckoo land and couldn’t run a whelk stall if you think business is going to raise wages – and if you try to make them they will just move to cheaper areas of the EU. Why should international business give a toss about the UK’s workers and their low pay.

    A system where the low paid subsidise their own wages. Fucking incredible.

    Labour created the current mess and the Tories continued with it because nobody knows how to stop it – and in the meantime big business is laughing all the way to the bank, literally.

  3. Landless Peasant says:

    We need Citizens Income, a stipend that is guaranteed and unconditional to provide a basic income for all. Anyone who wants more can work for it.

  4. Tafia says:

    We need Citizens Income, a stipend that is guaranteed

    We have that – it’s called tax credits. All a citizens income does – in whatever form – is subsidise employers.

  5. Landless Peasant says:

    @ Tafia

    I mean a guaranteed income not linked or related to working.

  6. Landless Peasant says:

    Labour and the TUC, along with the CBI, don’t seem to mind about the thousands of workers being forced to work for NO wage at all.

  7. Tafia says:

    I mean a guaranteed income not linked or related to working.

    You can’t it would damage and seriously distort the economy. It would depress wage levels and cause a drop in tax take at the same time as an increase in tax payer funded payments – making it unsustainable.

    Being unemployed must never ever be equal to or better financially than being on minimum wage with tax credits.

  8. Landless Peasant says:

    @ Tafia

    It is entirely possible if Governments stop wasting money on nonsense such as Welfare reforms whereby vast amounts of public cash is craftily being diverted into the hands of Private business, not to mention the £85 Billion a year giveaway in Corporate Welfare to big companies.

  9. Landless Peasant says:

    “Being unemployed must never ever be equal to or better financially than being on minimum wage with tax credits.”

    Then do away with Tax credits. A Citizens Income would provide a basic to all, and anyone who wants to be better off could do so by working. It’s just that some people seem to begrudge anyone else getting something for nothing, as they see it.

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