Reverse the inequality spiral!

Submitted by Matthew on 6 December, 2017 - 12:57 Author: Colin Foster
Reverse the inequality spiral

The share prices of big companies (the FTSE 100) continue to rise. Top bosses' pay dropped a bit between 2015 and 2016, but is on a long-term trend to rise faster than workers' wages, and stood at £3.45 million in 2016 (median pay for FTSE 100 CEOs). The average profit rate of UK firms (outside finance and outside the North Sea oilfields) recovered entirely a long time ago from its dip in 2008-9, and is now around 13%, compared to 8% in 2001.

While the rich rejoice, the big majority are pushed back. Average earnings are no higher in real terms than they were in February 2006, despite overall output being 4.4% higher. Real wages are still dropping. And the poorest are pushed down.

Analysis by the Joseph Rowntree Foundation released on 4 December showed that almost 400,000 more children and 300,000 more pensioners in the UK were living in poverty in 2015/6 compared with 2012-13. Child poverty fell substantially under the Blair-Brown New Labour governments, mainly thanks to tax credits. Pensioner poverty did not rise at first after the Tories returned in 2010, because the Tories, aware that older people vote more than younger, made their benefit cuts much lighter for the more elderly. But now the cumulative cuts in benefits and tax credits are taking effect.

Rising rents and cuts in housing benefit are pushing millions into poverty. 47% of working-age adults on low incomes spend more than a third of their income (including Housing Benefit) on housing costs. More than a third of working-age adults who get Housing Benefit now have to top it up out of other income to cover their rent.

The poverty rate has risen even while unemployment remains relatively low - 4.3%, much higher than in the 1950s and 60s, but the lowest it has been since 1975. People are poor not because they don't work, but because they can only get low-paid, insecure, often part-time work, and because benefits have been cut.

All the chiefs of the Social Mobility Commission, set up by the Tories to serve as a figleaf when they gained office in 2010, have resigned in protest. Their last report tells us: "There is a fracture line running deep through our labour and housing markets and our education system. Those on the wrong side of this divide are losing out and falling behind.

"In the labour market, major changes over recent decades have imprisoned five million workers – mainly women – in a low pay trap from which few find escape: only one in six of those workers who were low paid in 2006 had managed to find a permanent route out of low pay a decade later.

"At the other end of the labour market... only 6 per cent of doctors, 12 per cent of chief executives and 12 per cent of journalists today are from working-class origins".

The report also highlights the divide whereby young people in areas of economic decline, often smaller towns, have worse prospects than even the worse-off in economically-growing big cities. "In Kensington and Chelsea, 50 per cent of disadvantaged youngsters make it to university, but in Hastings, Barnsley and Eastbourne, the university participation rate for this group falls to just 10 per cent".

Labour's manifesto promises from June 2017, to take £50-odd billion per year from the best-off and big business and redirect to social provision, to establish a £10 per hour living wage, and to abolish zero hours contracts, are necessary moves but amount only to ratcheting the inequality spiral back a bit. Trade unions should be using the lower levels of unemployment as an opportunity to launch a real drive for industrial action to improve wages. And the labour movement as a whole should set the aim of establishing democratic collective control over the productive wealth of society, so that labour is rewarded according to need and not according whatever minimum the profiteers can get away with paying.