Making Work Pay…Less: The UK Government’s Assault on the Living Wage

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The UK has entered Black April, the month in which a raft of cuts to the Welfare State will leave disabled people up to £4,600 a year worse off while giving a £107,000 a year tax cut to the richest in the land.  The government argues these changes are all about ‘making work pay’.  But behind the scenes, they are launching a devastating assault on wages, terms and conditions of employment.

The Decline in Wages

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Increased access to personal debt (credit cards, loans, store cards, buy now pay later, hire purchase etc) has been masking the expanding gulf between cost of living and wage inflation for decades.

Wages have not simply stagnated but fallen.  In the UK today, the cost of living is rising at four times the rate of wages.  This means that in real terms, wages are falling. In fact UK wages are falling faster than any other ‘developed’ country, having been rolled back to 2003 levels, with the average working person earning less for their work today, than a decade ago.

Commentators of the neoliberal persuasion cheer this wage drop as a sacrifice that has helped the UK avoid the ravages of unemployment enjoyed by European states such as Greece, Italy, Spain or Portugal.  Yet, like so many other of their arguments, it seems the people forced to make the largest sacrifices are the people least able to afford to.  The same Executives cutting their employees’ wages in the name of austerity were simultaneously approving inflation busting pay rises for themselves.

The average pay of Executives in the FTSE 100 rose an average of 12% in 2011 alone, with 25 companies boosting Executive pay by 41%.

The picture gets scarier still when wider research confirms it is not just working people in the UK who are having their wages undermined, but workers around the world.

In the US, the earnings of so called ‘High School drop outs’  have dropped 66% since 1969, and people with some college – the median education level in the US – have seen their wages drop by a third.

The trend in rising global wages has almost stopped.  Wages rose 3% in 2007; dropping each year since to just 1.2% in 2011 (0.2% is you remove China from calculations).

Contrary to the language of workers versus shirkers in the UK, working people are working harder than they ever have, and for less.  Research by the International Labour Organisation reports that rises in Labour Productivity have outstripped wage inflation at an ever increasing rate in the last decades.  Between 1999 and 2011 Labour Productivity (the output of workers time and efforts) increased at double the rate of wages.  In Germany, labour productivity surged by almost a quarter over the past two decades while real monthly wages remained flat.

The reality the world over is that people are working harder, for longer, for less and that work is less likely to elevate their socio-economic position than at any time in the last five hundred years.

The Decline in Terms and Conditions

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The government talks of the injustice of people ‘trapped on benefits’, yet is actually making every effort to trap people in underpaid work.  They are creating a perfect storm by undermining employee terms and conditions whilst making people ineligible to claim social security in temporary shelter from unfair employers.

Business Secretary Vince Cable has been busily curtailing the rights of working people to a fair tribunal in cases of unfair dismissal.  The Enterprise and Regulatory Reform Bill brings forward a series of changes which will make it easier to sack employees and harder for them to fight back.

The Bill introduces a cap of twelve months pay, or £74,200 (whichever is lower) in compensation in cases of unfair dismissal.

Disgraced Barclays banker Bob Diamond who was forced to resign in the wake of the LIBOR rigging scandal left with a year’s worth of perks including use of a company car and chauffeur, private medical insurance, life insurance cover, accommodation while in Britain and tax advice.  He will also receive a £2m pay day in July of this year.

We are paying corporate criminals greater dismissal payments than regular working people who have been mistreated by their employers. Worse still, the legislation includes provisions to further reduce the cap to just £25,882 in future.

The Bill halves the period of consultation required when a company is to sack more than one hundred people, from 90 to just 45 days.  This would mean employees in a small to medium size firm could receive just over a months’ notice of collective dismissal.

The Bill also makes the employee pay to go to Tribunal.  These costs have historically been passed to the employer or the state, for obvious reasons.  From now on, it will cost a total of £1,200 (£250 to lodge a claim, and £950 if it goes on to court). This is more than the monthly wage of half the UK population.

Perhaps the most cynical piece of the Bill though relates to the permission of employers to have ‘protected conversations’.  This means an employer can take a staff member aside without prior warning, offer to pay them to leave the firm, make comments on their performance and the employee will be unable to use this conversation or any record of it in (non discriminatory) Tribunal Proceedings.

The government and corporate line on this is that is allows employers to have ‘frank conversations’ with their staff in cases of redundancy and under performance.  This is based on both groups characterising Tribunal proceedings as a David and Goliath battle, with the lone employee miscast in the role of Goliath, while the corporation is little David.

Next, the Attack on the Minimum Wage

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This week the government have begun signalling their next attack in the name of austerity – and it’s going to be the minimum wage.

The government is claiming that the minimum wage should be frozen or cut if it presents a danger to the UK economy, or business.  Yet, both parties in the UK’s coalition government campaigned against the introduction of the minimum wage for UK workers in 1998 (the Liberal Democrats eventually and begrudgingly supporting the proposal).

They were united in their view that by its very existence, the minimum wage presented such a danger.

Vince Cable, the current Business Secretary called the policy ‘misconceived’ and suggested it set a ‘dangerous precedent’.

Of course we know it had none of the negative impacts forecasted, but since when have this deceitful bunch ever let the facts stand in the way of a good argument?

Many sections of industry have argued against the minimum wage since its inception, and argued against rises in line with inflation every year since.  So asking ‘business’ to be the arbiter of the future of the minimum wage, really is asking turkeys to vote for Christmas.

The Living Wage

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These policies form part of a globalised race to the bottom for working people.  Corporations are increasingly outsourcing labour to developing countries, where working people can be more readily abused. The suggested response by the bulk of British politics and business is to level the playing field by dismantling the hard won protections from such abuses of people working in the UK.

But this is not the only argument in town.

There is a sizeable and growing group arguing instead that we transcend the minimum wage, by guaranteeing a Living Wage for working people.  This would mean employers would be required to pay their staff a wage which actually matched the cost of living in the UK.  The minimum wage for over 18’s currently stands at £6.19 per hour, whilst the Living Wage would be £7.45 (£8.55 in London). Not only would this resolve the issue of ‘making work pay’, but it would massively reduce the social security bill, much of which is made up of payments to working people to compensate the absence of a living wage.

The three most expensive benefit payments in the UK are Tax Credits, Housing Benefit and Child Benefit, totalling £56.4bn a year.  These are not ‘out of work’ benefits.

The rise in Housing Benefit which the government is tackling with a Bedroom Tax on social housing tenants is actually down to a massive rise in claims from working families.  Since the Bank Bailout of 2008, the fall in wages and the 37% rise in rents have caused the number of working people on Housing Benefit to double, to just under one million. With rents likely to rise to 140% of 2012 levels by 2018 and wages set to fall, this situation is only getting worse.

Launched by Citizens UK in 2001, the campaign has so far lifted 45,000 working people out of poverty and won £200m in increased earnings on their behalf.  But there are still more than five million people are working for less than the Living Wage.

The campaign has such diverse supporters as Boris Johnson, Ed Miliband, the Resolution Foundation, KPMG, Aviva, Linklaters and Save the Children.

Anyone with a clear mind can accept that the research demonstrates that the introduction of a Living Wage would do much to eradicate many issues of the day, whilst reducing wages further will only exacerbate them.

The government is not attacking people’s wages in the name of economics or fairness; instead this is an ideological assault in defiance of reason.  This anti-scientific approach to managing our economy and our society is not only ignorant, but dangerous.

28 thoughts on “Making Work Pay…Less: The UK Government’s Assault on the Living Wage

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  19. Thank you so very much for doing what you do. It can seem overwhelming at times, dealing with the misconceptions and blind hatred flaring up as a result of hate-filled diatribes in the media, and seems increasingly difficult to find voices of reason and compassion. Thank you so much for your clarity, dignity and balanced tone in setting things straight through reason and fact. I am sharing your posts through my Facebook page in hope of extending your voice. I am just so grateful to know that we are not alone.

    • Thank you so much Sue. It’s great to know I’m not whistling into the wind :) Thanks for your ongoing support in reading and sharing the blog and taking the time to give me a boost!

  20. Well peeps, what’s it gonna be? All the downtrodden need to either “grow a pair” or stop bloody moaning & yes before someone sends a rocket up my arse I too am one of the downtrodden & I for one have had enough…….

  21. Everything this government has done and intends to do, including the NHS privatisation, is driven by Tory ideological hatred of the Welfare State, NHS and paying a living, decent wage for all. When they use incentive to work and ‘strivers vs shirkers’ ‘taxpayers’ etc,. it’s part of the ideological divide and rule they’ve always adopted. Equally, these tories don’t suddenly want to create a utopian workforce of fairly paid workers, employers recognising them as the driving force to improve their profits, a country where the ordinary workforce are valued respectfully and with decent living wages! No, they are already stupidly referring to abandoning the minimum wage alongside their benefits attacks sermons! They want, and always desire cheap labour and massive profits. We are not idiots, Osborne cannot use the phrase ‘reward’ to promote his assault on benefits and the weakest and vulnerable, alongside his signposting that the minimum wage is in their sights to go! Wake up people, they don’t want to reward you or make you gain from employment, it’s another tool employed by a cabinet of tools!

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