For almost half a century, in other words within the limits of political memory, Britain has been a country where the priority of most governments has been to keep a few key economic numbers low. Income tax, interest rates, inflation and most people’s wages: all were deliberately suppressed by Downing Street and its collaborators in business and the Bank of England. By doing so a space was created – in theory at least – for certain interest groups to flourish: employers, entrepreneurs, shareholders, top earners, homeowners and consumers. Together, they were supposed to boost our previously sluggish rate of economic growth.
It hasn’t quite worked out like that. Britain is on the brink of recession yet again. Interest rates, taxes and inflation are all high. Only average wages are still low. And even that dubious achievement of British government and capitalism since the 1980s now feels fragile, with strikes solidifying and spreading across both private and state sectors, determinedly driven by workers who have finally had enough of years of falling pay. As Mick Lynch of the RMT union put it with characteristic pithiness on the Today programme last week: “The price of labour isn’t at the right price in this country.”
What might life be like in Britain if most people’s wages were more generous? One answer is more like life in many other rich countries. According to the United Nations, the share of our gross domestic product that goes to employees is lower than in France, Germany, Italy, Australia, South Korea, Canada, the US and half a dozen other, often more successful, capitalist nations. This “labour share” has fallen in Britain in most years since the late 1970s, when the great counterattack began against unions and decent pay for the many. The absence of this broad-brush but telling indicator from everyday debate in Britain is a sign of how much our politics is shaped by essentially rightwing assumptions.
But now the national conversation about pay seems to be changing. Lynch says the strikes – which despite months of disruption still have substantial public support – are ultimately about “the rebalancing of our society”. That’s a very ambitious goal for a union movement much smaller than in its 1970s heyday; which receives at best qualified support from Labour; and which faces a cornered Tory government that sees a successful confrontation with the unions as one of the few ways it might stay in power. Yet the cost of living crisis, and crippling staff shortages from the NHS to the railways, mean that the old Westminster and media orthodoxy that holding down pay is Britain’s only realistic option is losing its force.
Were salaries generally higher, it would almost certainly be easier to recruit and retain staff. Some of the large number of adults who have chosen to leave the national workforce in recent years would probably return. Workers might be more motivated and efficient, lessening Britain’s productivity crisis. Some employees would be able to work fewer hours, and families might benefit as a result.
With higher disposable incomes, people would probably spend more, boosting the British economy. Meanwhile the state would need to spend less on benefits that effectively subsidise low wages. According to the Joseph Rowntree Foundation, two thirds of working-age adults in poverty are in a household where someone works. Higher wages could make having a job a real – rather than often rhetorical – route out of poverty.
Realigning the economy with the needs of the majority would also have costs. Taxes or state borrowing would have to rise to fund better public sector wages – at least in the short term, until the in-work benefits bill fell, and rising incomes increased growth. Goods and services might also become more expensive. We have got used to a world where almost anything can be delivered cheaply to our door – and almost anything can be done to us at work. In a higher-wage world, we might lose some of our power as consumers, while gaining power as workers. At first, we might feel the loss of familiar pleasures more than we use this new agency.
But inflation has already begun to end the golden age of consumption for most of us, anyway. And higher wages may also bring more welcome disruptions. The gap between ordinary and elite earners, which has opened even further in Britain than most wealthy countries, might narrow – especially if taxes are raised to increase public sector pay. Such a narrowing could have psychological as well as material consequences. The extreme separateness and sense of entitlement of the modern rich, and the queasy mix of fascination and loathing rich people arouse in us, evident in hit TV shows such as Succession and The White Lotus, might diminish a little if economic security was not so unfairly distributed.
Now, some or all of these potential shifts may sound far-fetched. But an economy where most people’s wages grew rather than shrank has existed before in Britain. For much of the first three decades of the 20th century, and again from the late 1940s until the mid-1970s, the “labour share” increased. In fact, its trajectory over the past 150 years forms a wave pattern, with slumps regularly followed by recoveries. Another upswing is overdue.
It may be harder to achieve this time. During previous pay upswings, the economy and trade union memberships were often growing strongly, unlike now. Today’s workers will have to be canny and relentless to get more, when the rewards provided by capitalism may be shrinking overall for some time.
But the survival, instead, of the low-wage status quo feels increasingly uncertain. In 1962, one of the most influential modern economists wrote that “in a market society” the way that pay is distributed “is unlikely to be tolerated unless it is also regarded as yielding distributive justice”. Without a broad public acceptance of such economic arrangements, he went on, “no society can be stable”.
The economist was Milton Friedman, one of the gurus of the global right. With Britain in such a state now that even he and Mick Lynch might agree on a few things, were Friedman still alive, the end of our low-wage era may be coming.
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