Since the Great Recession, and among the world’s richest economies, pay growth in the UK has been historically weak. The Economist magazine reported on 20th April that the pay squeeze in the UK has eased during the last year or two, but is by no means over.
Nominal wages are now growing at around 3.5% year, while real wages (adjusted for inflation) are growing at 1.5%. In a way, this slight improvement is to be expected, with employment at a high level and unemployment relatively low, creating a tightening labour market, and shifting bargaining power from employers towards workers.
Another piece of good news is that more of the jobs now being created have higher pay. To put it another way, the composition of the workforce is changing. As The Economist put it, “strawberry-pickers have made way for stock-pickers”. Continue reading →
British workers are suffering, with little to show for it. As Sarah O’Connor writes in last Wednesday’s FT: “[they] are working harder than at any time in the past 25 years, to tighter deadlines and with less autonomy. Medical research shows a link between “high strain” jobs, which combine high pressure with a lack of control, and cardiovascular disease, musculoskeletal problems, stress and depression.” She notes that the recent World Mental Health Day brought news of employer initiatives to combat workplace exhaustion. But will this be enough? Continue reading →
The Observer’s Will Hutton calls for the reinvention of trade unions in the UK (article link below). The labour market continues to change, and workers need effective representation. The balance of power between capital and labour is a key relationship in a capitalist economy, and the dramatic rise of self-employment and the gig economy demand that unions respond.
Here is a useful extract from a recent piece in The Economist magazine on the economics of immigration. Surprisingly for this free market-oriented publication, which often emphasizes individual freedom in its analysis, they highlight the importance of structural factors in boosting the earning power of immigrants:
“Workers who migrate from poor countries to rich ones typically earn vastly more than they could have in their country of origin. In a paper published in 2009, economists estimated the “place premium” a foreign worker could earn in America relative to the income of an identical worker in his native country. The figures are eye-popping. A Mexican worker can expect to earn more than 2.5 times her Mexican wage, in PPP-adjusted dollars, in America. The multiple for Haitian workers is over 10; for Yemenis it is 15.
No matter how hard a Haitian worker labours, he cannot create around him the institutions, infrastructure and skilled population within which American workers do their jobs. By moving, he gains access to all that at a stroke, which massively boosts the value of his work, whether he is a software engineer or a plumber. ”
‘The best policy’, The Economist, March 18th 2017, p.74
An interesting post (link below) from Marxist economist Michael Roberts on the ‘zombie’ companies holding back economic growth across the rich world since the financial crisis. In short, many that would otherwise go bust are struggling on, just able to meet interest payments on their debt, since rates are so low, but unwilling to invest due to a low prospective return on their capital.
Roberts argues that for the average rate of profit for the whole economy to recover, the weakest and least productive firms need to fail, and resources (capital and labour) need to be reallocated to firms with brighter growth prospects.
If this happens, there is likely be some considerable short term pain in the form of rising unemployment in the midst of bankruptcy as economic restructuring takes place to restore average profitability across the economy.
Where I disagree with Roberts is in his solution to these kinds of problems under capitalism: socialist revolution and widespread central planning.
There are alternatives to this, which can mitigate some of the social pain of economic restructuring without necessitating socialism. Continue reading →
Mass immigration across the capitalist world is arguably one of the factors that has been fueling nationalist and populist politics. From Brexit in the UK to Trump in the US, anti-immigration rhetoric has proved appealing to many. Despite promises made by former Prime Minister David Cameron here in the UK, net immigration from the EU and beyond has been substantial since the Conservatives came to power in 2010.
It is clear that huge numbers of immigrants come to the UK to find higher paying jobs than they would get in their home countries, and the EU’s policy of free movement has been part of this story. A number of Eastern European countries joined the EU in 2004, when Tony Blair’s Labour Party was in power, and immigration soared. Nevertheless, until the Great Recession of 2008, unemployment stayed relatively low. It rose during the recession but has since fallen back to fairly low levels, with record numbers now in work.
If those immigrants who have taken low paying work in the UK have had any impact on the labour market, it is argued that this has been through them depressing wages at the bottom of the distribution rather than affecting overall employment levels. This has been the subject of debate, and I will not go into that here. What I want to argue is that part of the response to those who are concerned about immigrants should be to encourage the creation of better-paid jobs in their home countries. Continue reading →
Keynes argued that government policy could restore full employment under capitalism
What should be the direction of economic policy in the US and more widely following the damage wrought by the Great Recession and its aftermath? Sluggish growth across many advanced countries continues to be a problem. Where jobs have been created, there has been wage stagnation. In the US, this stagnation, which has recently shown signs of abating, has afflicted the average worker for several decades. These economic trends have surely contributed to disaffection with the established elite and the rise of populism and a more radical politics. Continue reading →