There was an interesting little sentence in the Treasury’s evidence backing up the issue of regional pay for last week’s budget. It said “the public sector pays more than is necessary to recruit, retain, and motivate staff in some areas”. In some ways it reveals a lot about the thinking and ideology behind government policies (and let us not forget that Labour also wanted regional pay when in government).
At one level, it displays an almost incredible degree of double standards. The higher-paid, we have been told incessantly, have to be highly paid to reward their efforts; but it seems that the lower-paid should be employed for the lowest rate at which their labour can be purchased. If we were to employ the same standards at both ends of the spectrum, the income gap would be a great deal smaller. Does anybody really believe that we couldn’t “recruit, retain, and motivate” bankers (or politicians, for that matter!) for lower salaries than they’re currently paid?
At another level, it’s merely an obvious statement of a classic concept in economics – employers will seek to employ labour at the minimum pay for which their labour can be purchased. The counter concept is that labour should seek to extract the maximum wage that it can obtain from employers; balancing the two is a major part of what collective bargaining is all about.
In one sentence, however, the government have effectively abandoned any pretence at neutrality in the capital vs. labour equation; they are coming down very firmly on one side. Whilst, in context, this applies only to employment by the public sector, I cannot believe that they wouldn’t be guided by the same principle in more general terms; nor that other employers won't take their cue.
Perhaps we shouldn’t be surprised at that, but I can’t recall any government having previously stated so clearly and explicitly that it is in favour of lowering wages to the minimum level at which staff can be attracted and retained, as a matter of policy. Not during the post-world war 2 consensus, anyway.
Little by little, over the past 30 years, the gains made by organised labour in the past have been eroded, by successive government of both colours, in the name of progress and flexibility. The power of capital has increased while the power of labour has decreased. Regional pay, on a rationale like this, is another step along the same road.