Thursday, 26 February 2015

Low Wage Chickens Coming Home To Roost

For the last thirty years, in the US and UK particularly, economic policy has been based upon a conservative agenda of low wages, and a corresponding high level of private debt. That together with the relaxation of financial regulations in the late 1980's, and the corresponding financial architecture required to sustain such a model, was the cause of the financial crisis of 2008. That was just one expression of the contradictions that this particular economic model created. Those contradictions were not resolved but only postponed and intensified by the measures taken to bring that financial crisis to a halt. They will break out once more, even more violently, in the not too distant future. However, its also clear that the low wage agenda has also created a series of other contradictions some of which are now becoming apparent.

Last week, my attention was drawn to two particular news stories in this context. A story on the BBC Midlands News, commented on the severe shortage that exists for lorry drivers. The shortage has also been noted by MP's. According to the BBC report, there is currently a shortage of around 45,000 drivers, and one haulage contractor reported that where they normally have a steady flow of people making enquiries about driving jobs, for the last few months they have had none. In fact, with the number of older drivers due to retire, its expected this figure could rise shortly to 75,000.  One major problem cited, is the fact that the cost of obtaining an HGV licence has now risen sharply to around £4,000. The hauliers are to ask the government to provide £150 million to fund additional driver training.

But, the point surely is that the real answer to this problem resides with the hauliers themselves. We are told that bankers and the chief executives of companies must be paid millions of pounds per year to recruit and retain them, or else they will all go abroad. In fact, there seems little problem recruiting enough people to such lucrative posts, where the salary tends to be in inverse proportion to the actual amount of work done, and where even severe failure is no impediment to being paid huge bonuses, or given enormous golden hand shakes, before moving on to the next similar post.

But, when it comes to a very real, and significant shortage of a vital job like being a lorry driver, to ferry all the commodities around the country that other workers have produced, the capitalists and their media seem to forget all about this logic! Rather they seem puzzled as to why they cannot recruit sufficient workers to do the job. As with so many other aspects of life, and the contradictions caused by the economic model, developed over the last thirty years, they instead look to the state – i.e. workers taxes – to bail them out, just as the bankers did before them, just as capital based in London does, as it seeks to obtain rail subsidies to cover the travel costs of its workers, and Housing Benefits to cover the rent of its workers.

It never seems to have occurred to the haulage companies that if they cannot recruit enough workers, the cause might just be that they are paying wages that are too low, and that have been screwed down for the last thirty years. If wages were higher, not only would this attract more workers, but it would make it more worthwhile potential workers paying out the £4,000 to obtain an HGV licence. Alternatively, the haulage companies might want to consider the radical notion that if the cost of obtaining the licence is an obstacle, then instead of expecting the state to pick up the tab, they might themselves take workers on as trainees, and provide them with the necessary training, so as to get the HGV licence.

The other story that caught my attention was in relation to childcare. The cost of childcare had risen considerably we were told, up by over £1500 p.a. to £6,000 p.a. per child. The cost was so high, we were told that some parents could no longer now take up employment, because the cost of childcare outweighed any income they might obtain from working. Once again, the solution was to be found by the state riding to the rescue, and subsidising this cost. No one seems to consider that, once again, its not that the cost of childcare that is too high – though if it were provided more universally by worker owned co-operatives, the unit cost could probably be reduced considerably – but that wages are too low! If workers can barely cover just one aspect of the costs of reproducing their labour-power, and a pretty important one, when it comes to the rearing of the future generation of workers, then that is a sure sign that wages have fallen below the value of thatlabour-power and need to rise substantially.

The answer to that problem, just like the answer to the fact that workers cannot afford to pay their rents, their rail and other travel costs, and so on, does not lie in subsidies provided by the capitalist state, but lies in the need for their wages to be increased substantially so that they can afford these things. If various businesses cannot operate profitably once they have paid those higher wages, it is again an indication of just how distorted and mangled the economy has become, as a result of this policy of low wages, high private debts and state subsidies. It means that many companies currently getting high profits, will have to see them shrink; it means other companies will need to introduce far more efficient means of carrying out their business so that they can pay the necessary higher wages, and it means that many of the zombie companies that have only managed to exist for the last two or three decades on the back of of these low wages, poor conditions, low interest rates, and state subsidies, should go bust so that their capital can be used more effectively elsewhere, and then be able to employ workers on adequate wages and conditions.

The idea that the solution to these problems comes from a continuation of these policies of state subsidies is insane. Take the example of child care. In order to achieve this requires that the state take money off one group of workers and give it to another. In reality, it will in part be taking that money off the same group of workers it then hands it back to, as some form of child care subsidy. But, either way, rather than achieving the real solution to the problem, of bringing about a rise in wages, it compounds the problem, because by taking money off workers it reduces their wages! Some of the other workers it takes money off, will be those that are to be subsidised for their train fare, or their rent, and by taking money from them to cover these child care costs, it will thereby make them even less capable of paying their train fare or their rent!  In actual fact, its not the workers that are being subsidised by these means, but their employers who thereby get away with paying them inadequate wages.

The extent of that can be seen by looking at the extent of Housing Benefit obtained by landlords. According to Generation Rent these landlords alone obtain around £27 billion in such subsidies every year.  Not all recipients of Housing Benefit will be in work, and so this does not represent a direct subsidy to the employers of £27 billion.  But, the majority of Housing Benefit recipients are in employment, and so a large proportion of this £27 billion does represent a subsidy to those employers, who thereby get away with paying lower wages.  Compare it with the fact that according to the TUC, in 2013 Britain's total wage bill amounted to just £52 billion!  In other words, the subsidy to employers from Housing Benefit alone amounted to almost 50% of the total wage bill!  Add in all of the other subsidies to low paying employers, fed to them via the welfare state, which covers a large part of the costs they should be covering themselves in wages to their workers, and it can be seen just how contorted the economy has become, and just how much better paid workers are handing over in taxes to boost the profits of these inefficient small capitals.

But, the whole procedure has one greater flaw, it is that in order to achieve it, requires that thousands of government bureaucrats be employed for no other purpose than to collect the tax that is then to be distributed as a subsidy. It also requires several thousands more government bureaucrats to take responsibility for paying out the subsidy. It will require office buildings, computer systems and other vast expense to bring about. So, millions of pounds will be collected from workers in taxes, but instead of this tax then going to some other workers to assist them with their childcare costs, the taxes collected will simply disappear down a huge black hole at the centre of the capitalist state machine.

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