by Alex Kempshall
EVER SINCE society divided into classes the all-important question of remuneration for work done has loomed larger than any other in the political economy of human society. When capitalism became the prevailing mode of production its integral component, wage labour, made this aspect an even greater issue in the arena of inherent conflict between labour and capital.
The ruling class and all those who serve it have evolved more sophisticated methods to contain and reduce wages as a share of the proceeds ofproduction. In 1949 workers got 57 per cent of gross domestic product (GDP).By 1975, through the strength of the trade unions, this had increased to 65 per cent of GDP dropping back to 52 per cent by the end of the Tory government in 1997. By 2006 the gross operating surpluses of corporations(profit) totalled £301 billion and compensation of employees was some £721billion or 55 per cent of GDP; so some of the profit has been clawed back from the ruling class but there is still a long way to go to reach the 65 per cent of GDP that was achieved in 1975.
The British labour movement, during the 30 years from 1945, succeeded in building a fairly comprehensive system of social services and monetary benefits. This represented a social wage and was a means of recovering for the working class part of the profits that employers of labour had extracted from workers at the point of production.
This only came about because of the collective strength of the working class, organised through the trade unions pushing successive Labour Governments to legislate is favour of the working class, by establishing a comprehensive tax systems to pay for the social wage. In this way part of profits made from exploiting workers was recovered from the ruling class. Even so it should be remembered that the substantial proportion of the social wage was funded by taxing the working class. The social wage, as with wages, is an ongoing bone of contention between the classes.
The capitalist class seeks to ensure that more and more of these profits are retained after taxation, either by Government strategy to pass the burden of taxation increasingly onto the working class, or simply by tax avoidance.
According to the Government’s National Audit Office analysis of tax raised it was found that almost a third of the Britain’s 700 biggest businesses paid no corporation tax at all in the 2005-06 financial year. Some even received tax credits – J Sainsbury, the supermarket group, instead of paying corporation tax received a credit of £3 million in 2005-06 and in the following year it received another £9 million tax credit. For those financial years it made profits of £352 million and £429 million and distributed to shareholders dividends of £136 million and £165 million.
When the Government takes steps to increase the taxation of private equity firms from its current 10 per cent, the ruling class complain bitterly about the abolishment of taper relief on capital gains tax (CGT) in favour of a single 18 per cent rate. When Labour came to power in 1997 this tax was a single 40 per cent rate; the following year Gordon Brown reduced it to an effective rate of 10 per cent. Only £2 billion is paid in CGT, so even after doubling it the amount of tax paid will still be less than half of the bonuses paid to city bankers in any one year. The Government should revert to the 1997 position of treating CGT as income tax at the present higher rate of 40 per cent.
Corporate profits and capital gains are not the only form of income that accrues to the ruling class and their side-kicks. An examination of the division of wealth and incomes shows that the top fifth of the populationowns by far the biggest ratio of wealth in Britain. Historically income has always been grossly unequally divided, now it is even more so.
Income Data Services, a research organisation, recently revealed that chief executives of FTSE 100 companies saw their average total remuneration (pay,bonus and long term incentives) increase to the end of June 2007 by 16 percent to £3.17 million, doubling over the last five years. Meanwhile those in the FTSE 350 rose by 20 per cent during the same 12 months. Also in a poll of pay experts “drawn from human resources managers and compensation and benefits specialists conducted in September 2007, Income data Services found that more than half thought that executive directors of listed companies were “overpaid”.
Brendan Barber, TUC general secretary, commenting on this report said:“Britain’s top directors clearly have no shame. Year in, year out they have been paying themselves far bigger rises than they are prepared to pay their staff, while lecturing the rest of us on the need for low taxes. It beggars belief that they are somehow working twice as hard as five years ago. Confirming the unpopularity of fat cat salaries an opinion poll conducted during the summer of 2007 for the Financial Times found that almost 60 per cent of British citizens thought that the Government should cap the earnings of senior executives.The description “fat cats” also extends to bankers and traders in the City who took home £8.8 billion in bonuses in 2006 and a further £7.4 billion in 2007. This is anticipated to drop, on the basis of the current monetary crisis, to a paltry £6.2 billion in 2008. These bonuses pushed up the average earning index from 3.3 per cent to 5.4 per cent during the month of February 2007.So there’s plenty of money for those with their noses in the trough!
What about the workers?
A report published in October 2007, by uSwitch – the online gas and electricity price comparison organisation, based on figures produced by the Office for National Statistics figures, showed that disposable income in Britain is at its lowest level for a decade with net household income as a proportion of gross household income down five per cent compared with 1997,mainly due to utility bill and tax increases.
Despite this, consumer spending rose 3.0 per cent in the first three monthsof 2007 compared with the same quarter the previous year. It is therefore not surprising that consumer debt has reached a record level of £1,345 billion, almost double the gross annual wage of all employees in Britain.
In April 2007 median gross weekly earnings for full-time employee jobs on adult rates was £457, an increase of 2.9 per cent on the previous year, with25 per cent earning less than £326. In the private sector the median was £439, in the public sector the comparable figure was £498.
The median gross weekly earnings rate for all employee jobs was £362 per week.
However, if we look at average earnings, as the Labour Research Department(LRD) does, average earnings in April 2007 were £554, up about 3.5 per cent on the previous year. This disparity illustrates the difficulty in assessing what wage rates are and demonstrates the old adage that there are lies, damn lies and statistics. Average wages can easily be distorted by high paid workers. Incidentally the Government is introducing a new “experimental”method of calculating average wages that attempts to show that wages are actually rising at 4.5 per cent, which the Financial Times claims is “closer to the levels likely to trigger inflationary concerns”.
So according to National Statistics Online, wages are rising at either 2.9 per cent, 3.5 per cent or 4.5 per cent, which just goes to prove that an across the board flat-rate monetary increase of substance is the only way forward to unite the class in fighting for higher wages at the expense of the ruling class.
The following example illustrates the difference between the mean and median when analysing statistical information. Most people use mean and average interchangeably.
Suppose in a factory eight workers get paid £1 per week, one gets paid £2 and a further eight get paid £5. The total wage bill for the 17 workers in the factory is £50. If the total wage bill was divided equally among the workers the average wage would be £2.94. The median of the wages paid can be found by arranging all the wages paid from the lowest wage to highest and picking the middle one. In this factory it is the worker with the eighth highest wage which is £2 because, of the 17 workers, there are eight workers paid less than £2 and eight paid more than £2. By contrast, the average wageof £2.94 is not at all typical, since nobody in the factory is paid a wage approximating £2.94.
Looking at real wages the LRD, in its survey of wage agreements, reported that a worker on the Nissan assembly line could earn a maximum weekly wageof £489. At Airbus UK a skilled worker earns £400 per week. At ArrivaNorthWest an experienced bus driver earns £307 per week and at BAe SystemsSurface Fleet Solutions a skilled worker could earn £350 per week. To earn more than the average wage at Nissan a worker would have to be in a supervisory engineer role, in the other agreements none of the workers earn a wage approaching the average.
In a survey produced by the Higher Education Statistics Agency, reported bythe Financial Times on 5th November 2007, showed that more than one in five male and more than a quarter of female graduates in full-time work are still on less than £336 a week 3½ years after graduating – well below the full-time National Statistics Online average wage of £554. Interestingly this Financial Times article reported that the average wage was £423!
So whether it’s the Financial Times’ average wage of £423, ASHE’s median wage £447 or the £537 average wage publicised by the Government some, trade unions have negotiated seemingly significant percentage wage increases that have included a 7.9 per cent rise for 600 workers at Drax power station inYorkshire, a 5.35 per cent pay rise for 10,000 Network Rail workers, a 4.7 per cent increase for 60,000 BT staff, and a 4.5 per cent rise from April at BAE Systems Submarines – proving that the higher pay rises go to the best organised. But the 7.9 per cent awarded to workers at Drax power station based on the Financial Times’ average wage would still leave workers £80 per week short of the average wage, as publicised by the Government.
For wage settlements negotiated in July 2007, as reported by LRD, 25 per cent secured a wage increase of 4.58 per cent or more, 25 per cent secured awage increase of three per cent or less with a median of four per cent.
It should be emphasised that these figures are for organised workers. Those workers in areas where there is no strong union would expect pay rises substantially less than these negotiated rates. Even so the median of four per cent is barely above the increase in the cost of living and 25 per cent have suffered what is effectively a pay cut. Overall average earnings roseby 3.7 per cent driven mainly by bonuses in financial services, namely bankers.
Postal workers will have decided, by 27th November 2007, whether to accept a headline pay increase of 6.9 per cent over the next two years. Effectively what is actually on offer is a 3.8 per cent offer for the year ending March 2008. A further 1.5 per cent increase plus £400 for 2008/09 is on the table,to be made locally, when new flexibility arrangements have been implemented.
The agreement between the CWU and the Post Office states the flexibility arrangements as: “To cover for one another and develop sensible options toabsorb absences and increased workload, where time exists within normalhours”. The reward for this is to be implemented on a local level; again quoting from the document: “Local offices will be entitled to the 1.5 per cent pay increase from 7th April 2008, subject to deployment of these new arrangements. Any offices where deployment is deferred will receive the additional 1.5 per cent from the date of deployment”. In addition the pension scheme will be closed to new members and existing members will have their retirement age raised from 60 to 65.
As a reward and no doubt and in anticipation of the postal workers acceptinga pay cut, Royal Mail directors’ pay increased from £4.3 million to £7.3 million in the year to the end of March 2007, with chief executive Adam Crozier receiving a pay rise of £69,000, plus £140,000 in lieu of pension and £1.1 million paid into his incentive plan. A delivery postal worker is paid as at the end of March 2007 a maximum of £311 per week or £16,172 peryear.
With inflation increasing at 4.2 per cent per year, according to National Statistics in October 2007, even the median trade union negotiated pay settlement of four per cent is effectively a pay cut. Inflation is expected to increase for the foreseeable future, primarily though food and fuel inflation. World food prices have risen in the past year by 11 per cent and non-food inflation runs at a rate of about seven per cent, according to International Monetary Fund estimates.
Back in 1996 the International Labour Organisation criticised the rise in wage inequality particularly in the US, Britain and New Zealand, which it argued is partly due to the decline in trade union density and decentralisation of pay bargaining.
The mean total weekly paid hours of full-timers was 39.4 hours in April 2007 and the percentage of full-time employees working paid overtime in was 22.5 per cent. At our 2006 Congress we noted that some 4.76 million workersworked an average of 7.4 hours unpaid overtime every week, saving employers £23 billion a year. This is only part of the picture as an increasingly significant amount of time is spent travelling to work.
The TUC produced a report in October 2007 which revealed that the number of people travelling for more than an hour to get to work had risen by more than 22 per cent since 1996, with an average of 54 minutes to get to and from work each day. More than 1.3 million people working in London travel for more than two hours each day and half a million do so in the north-west.All this adds significantly to the stresses and strains of the working day.Is it little surprise that 1.09 million people are on incapacity benefitsuffering from “mental and behavioural” problems?
What of jobs?
At the end of August 2007:
The employment rate for people of working age was 74.4 per cent or 29.10 million – a rise of 82,000 over the year; in the previous 10 years employment was growing at 300,000 a year. So in the last year employment prospects have reduced significantly.
Of the economically active 400,000 were in temporary employment solely because they could not find permanent work and more were self-employed due to the loss of a salaried job.
There were 7.97 million people of working age who were economically inactive, 1.65 million were classified as unemployed, 835,000 were claiming unemployment benefit and a further two million who, although not actively seeking work, would do so if jobs were available.
There are also 200,000 16 and 17 year-olds looking for work. The Treasuryhas estimated that the number claiming unemployment benefit will rise to 930,000 over the next 12 months. Thus there are probably four million people looking for work, most are unlikely to find a job as there currently only 668,800 job vacancies.
These numbers of economically inactive are the highest since comparable records began in 1971.
In the later part of 2007 xenophobia has been lifted to be the number one tool to attack the unity of the working class.
This should come as no surprise when one considers that the British capitalism has failed to maintain economic growth compared with itscompetitors. To this end they have elevated statistics to “prove” that foreign-born workers are cutting “British” workers out of the jobs market. It has been claimed that the 1.5 million foreign workers, who arrived since1997 and have filled more than half of the new jobs created since 1997.
So what? If one is trying to persuade people that immigration is good or bad, one has to analyse its impact on the gross domestic product and its distribution, after subtracting the incomes earned by these foreign workers.The closest we get is a report, highlighted in a recent edition of the New Worker, produced by the Treasury, Home Office and Department of Work andPensions, which showed that on this basis they contributed £6 billion a year to the British economy. What isn’t discussed in the bourgeois media is:
• why has job creation collapsed by 220,000 jobs this year?
• why has inequality increased?
• why are workers working longer hours?
• why do workers have to commute ever greater distances to find a job?
• why are record profits being made at the expense of wages?
• why are the ruling class taking more and more from the economy to furnish their lavish lifestyles?
• why are workers having to spend future earnings (go into debt) justto maintain their standard of living?
The reason why the media isn’t posing these questions? It’s because the truth is too unpalatable – namely that capitalism isn’t working. When capitalism is in difficulties the capitalists have to find scapegoats and at the moment what better scapegoat than a foreign worker. Therefore we should support the TUC resolution adopted at the 2007 TUC Congress which stated:
“Congress recognises the benefits to the economy, public services and local communities of the presence of migrant workers but believes that more must be done to tackle exploitation and abuse by unscrupulous employers, to encourage recruitment of migrant workers to the trade union movement and to improve and enhance support services provided to migrant workers and theirfamilies.”
Manufacturing is the most important sector of the British economy as this is the main wealth-creating sector. Manufacturing currently generates around£147 billion of export revenue a year. The success of manufacturing within Britain is essential for future prosperity. Although it accounts for only a fifth of the economy it generates 60 per cent of all exports and 80 per cent of spending on research and development.
However, among the ruling class and their representatives in Government, the predominant school of thought is that it is the financial sector that is the key to Britain’s future. One would have thought that the events during the summer of 2007 should have dispelled any belief in that theory. To quote Ken Lewis, Bank of America’s chief executive officer: “I’ve had all the fun Ican stand in the investment banking business at the moment. You can’t have a business where you make money for five years, then give it all back in one year”. Well the financial sector doesn’t magic up money from thin air, all it does is move around the value added by workers to raw materials, in other words those workers who work in the extractive, agricultural, engineering and manufacturing industries.
So what is happening in manufacturing? In the last two years the haemorrhaging of jobs from the sector has continued at an alarming rate. In 1997 there were six million employed in manufacturing; by May 2004 employment had dropped to 3.3 million. Two years later in May 2006 that figure has dropped to three million.
But seen in context, the gross value added in manufacturing in 2005 was £148billion, almost 20 per cent higher than in 1979. So with a considerably reduced workforce and increased use of new technology it was still able to add significantly to the British economy. In relative terms it has grown more slowly than that of other developed economies – being out performed during the last 25 years by the US, Japan and Western Europe.
Britain’s manufacturing decline has been exaggerated, by as much as 20 per cent, by the outsourcing of functions such as accounting and delivery services. When these activities were an integral part of manufacturing they were defined as manufacturing activities and not costs. Once outsourced to service companies they are recorded as part of the service sector and are recorded in the profits of that sector and this has been used as a tool to divide the industrial working class.
It is no coincidence that the Tory attacks on trade unionism went hand-in-hand with the dismantling of the coal industry, manufacturing and agriculture. The only way to redress the balance and defend manufacturing is for a stronger trade union movement. No amount of legislation, hand-wringing or any Alternative Economic and Political Strategies is going to force the ruling class to reverse their direction.
The TUC, at its 2007 Congress, resolved to call upon the Government to:
“Establish a fair trading environment for British manufacturing byaddressing, in particular, the excessive costs of energy; inappropriatetrade and public procurement policies; and the failure to utilise available European Union resources to promote British manufacturing advance.”
No mention here of reversing the Tory anti-trade union laws, no mention of increasing wages – so that workers can buy back the goods that they produce.
Then in November 2007 in response to the Government’s proposals for apprenticeships the TUC issued a press statement : “The TUC welcomes measures to improve the number of apprenticeships on offer to young people starting out in the world of work and to older workers looking for a change of direction.
“If apprenticeships are to offer meaningful career opportunities, they must be of good quality, where apprentices are treated well and earn a decent wage. Legislative powers to regulate and promote apprenticeships give the opportunity to do just that, and it is important we get it right. The Government should ask the Low Pay Commission to review the current minimum wage exemptions that apply to apprentices.”
Contrary to this legalistic approach by the TUC, the key to the defence of manufacturing and apprenticeships is more trade union rights and higher wages. The struggle to raise wages would go some way towards strengthening trade unions and giving greater confidence to their members and encouraging young workers to join. It would place the unions in a more favourable vantage point to secure the restoration of free collective bargaining and tow in back other working conditions that have been lost over the last 30years.
A resurgent labour movement would have renewed power to offset the effects of imperialism and to bring pressure to bear on the ruling class to reverse the decline in manufacturing and wages.
The lifting of the morale and class consciousness through struggle would play a positive role in improving the stance of the Labour Party, making it more responsive to the needs of the working class.
It may be objected that such a strategy would be doomed to failure. The answer is that it is the struggle itself that is crucial and the activity it engenders. Through the struggle some immediate material benefit may accrue to the working class, and it might hinder the ruling class’s offensive against long-established conditions. More important, the objectives of the struggle will serve as a focus, a direction, for the class helping the cohesiveness of its activity. In this the question of fundamental change is bound to surface.
After all it was Lenin who said:
“However, strikes, which arise out of thevery nature of capitalist society, signify the beginning of the working class struggle against that system of society.
“But when the workers state their demands jointly and refuse to submit to the money-bags, they cease to be slaves, they become human beings; they begin to demand that their labour should not only serve to enrich a handful of idlers, but should also enable those who work to live like human beings.
“When the workers refuse to work, the entire machine threatens to stop.Every strike reminds the capitalists that it is the workers and not they who are the real masters – the workers who are more and more loudly proclaimingtheir rights. Every strike reminds the workers that their position is not hopeless, that they are not alone.”
As part of the struggle to defend the class we should give full support toand demand that the TUC lives up to its decisions to:
• give full support to unions taking action to defend jobs andservices and to win fair pay;• ensure that no Remploy factory is closed;
• oppose the two per cent pay target for public sector workers byco-ordinating opposition at national and local levels, including co-ordinated joint industrial action;
• organise a national demonstration against any furtherprivatisations;
• defend the welfare state;
• fast-track action on equal pay.
If the TUC can be pushed to take up these demands in a forceful way, the confidence to take on bigger tasks will be immeasurably strengthened. In doing so we must demand that the TUC does not take the “honest broker”approach as it has done in other recent struggles. TUC general secretary Brendan Barber chaired the recent talks between the CWU and Royal Mail; instead he should have been on the picket line.
Trade unionists, Labour Party activists and Communists must act to reverse the direction taken by Brown and Blair in their desperation to run capitalism.
Trade Unions and the TUC exist to defend workers. They are not revolutionary organisations to bring about the overthrow of capitalism. But neither do they exist to hand workers over to capitalism on a plate.
Trade unions should coordinate bargaining by launching simultaneous and substantial increases in pay. Other demands should include the 35-hour week, full employment, health and safety, training, the protection of core skills and safeguards for labour mobility, flexibility and productivity.
Prior to 1997 most trade union conferences agreed not to support “wage restraint or an incomes policy under the next Labour government” and to“oppose any attempt to undermine free collective bargaining.” A united struggle, in which the TUC coordinates the movement to win wide support for each struggle and on a number of these fronts will inevitably lead to confrontation with the law. On this basis the law can be challenged by a movement united around these common set of goals – pay, hours and jobs.
