The UK has long been a low wage economy. But will any political party recognise the problem and address it?
I live near the market town of Southwell, famous for its Workhouse. Built in 1824, it became the model for many others. One problem the Workhouse was addressing was that farm labourers were earning less than they needed to live on. Each parish had the responsibility of caring for the destitute and the burden was unwelcome. (The parishes were given this responsibility after the closing of the monasteries, which, until then, had provided help.) Instead of each parish paying each farm worker a supplement to their wages, a central provision was established where the poor would live and work under strict supervision. Workhouses quickly became intensely feared by working people, and objects of the ire of Charles Dickens and others.
Why were the landowners / farmers not instead told to pay their workers a decent wage? Such interference in the affairs of the well-off was deemed out of the question. Instead of the employers paying more, the burden was shared among all parishioners. Low wages were the accepted norm, with a more or less harsh ‘safety net’ for those unable to live on such wages.
The UK today operates a variation of the same system. Instead of each parish caring for the poor, sometimes united in the provision of a workhouse, our Government cares for the poor. Those on low wages are supported by the general taxpayer through personal allowances and tax credits. Surely it would be better for the employers not to pay such low wages? Why should tax payers effectively encourage and support employers in not paying decent wages?
The standard answer is that companies need to make profits and these profits are more of a priority. Company profits are mostly for shareholders. The interests of the shareholders are deemed more of a priority than those of the workers. Between 1824 and today the landowners and farmers have been replaced by shareholders. The underlying understanding is the same. Low wages are ‘good for business’ ie good for shareholders.
UK shareholders do very well out of this system. The priority of shareholder entitlement to profit means that the UK has the largest and most widening gap between the rich and the poor in the Western world. The Sunday Times Rich List recently elevated the chief shareholders of Primark, Home Bargains, and B&M Bargains to high places in the list. Investors in decent companies, not spectacularly innovative ones, see their wealth increase far more than the wealth of workers is the same companies. The huge wealth of the US investment guru Warren Buffet has been built on this simple understanding. This is great for shareholders but can in no way be deemed to be loving your neighbour as you love yourself.
The widening gap between shareholders and the rest is also not good for the country as a whole. Such inequality is closely correlated to, and probably contributes to, poor health, greater crime, increased unhappiness. (See http://www.equalitytrust.org.uk/resources/spirit-level-why-equality-better-everyone) Our nation as a whole does not benefit. The common good is undermined by what is good for shareholders. Yet our nation subsidises shareholder profits massively through allowing limited liability. Shareholders are allowed to walk away from debts incurred through failed business while enjoying in perpetuity the benefits of successful businesses.
The UK model is not the only one. In Germany all companies have to be governed by a Supervisory Board composed of both shareholders and workers. Strategic decisions are made with the interests of both shareholders and workers in mind. As a result Germany has a high wage economy with much greater local manufacturing, much greater investment in development, and shareholders who are content with their level of return over a longer rather than shorter term.
The UK Government, whatever party is in power, has long encouraged a low wage, high shareholder return, economy. The clearest recent encouragement was the decision by the Tory / Lib Dem coalition to sell the Post Office to shareholders alone instead of investing ownership substantially in the workers, probably alongside shareholders. With workers having no more influence on company decisions than in any other shareholder company, Post Office wages will fall to the level of their competitors while the new shareholders will benefit as do those of their competitors. Post Office workers who cannot manage on the low wages will need Government support. (See https://rogerharper.wordpress.com/2013/07/15/uk-government-promotes-low-uk-wages-15-july/) When Labour was in power over many years a Minimum Wage was introduced at a low level but the basic system of prioritising shareholder returns was left untouched.
I would love to vote for a high wage UK economy at last. But tomorrow that option doesn’t seem to be on offer.
Roger Harper
Rogerharper's Blog 