Ultimately, it's our own fault

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In a capitalist economy, ordinary citizens serve only two functions – they can be a source of labour or consumers of products and services. That doesn’t preclude them from being both, of course, but those who are neither are, essentially, surplus to requirements. That’s putting it bluntly – and most capitalist economies are overlaid with at least an element of social democracy which seeks to mitigate and/or gloss over the worst effects of capitalism. But the core ideological debate within UK politics is about the degree of mitigation and gloss; not about the fundamentals. Labour is as wedded to the underlying ideology as the Tories, they just argue about the extent of mitigation.

Understanding that raw fact about the nature of capitalism is core to understanding the Tory attitude towards the unemployed, or those dependant on the state pension. They are seen as burdens, rather than full members of society. Whilst actively culling them is a step too far, even for the more extreme members of the current cabinet (although if a pandemic does part of the job, that’s just serendipitous), keeping them as poor as possible comes a close second. The fact that we have one of the lowest state pensions in the developed world is one illustration of the attitude; yesterday’s announcement of new benefit sanctions on the unemployed is another. The government’s ‘solution’ to a situation in which there are 1.2 million vacancies and 500,000 unemployed is to force people into whatever jobs are available, regardless of preference or skills, by driving them deeper into poverty if they are unemployed for more than four weeks.

It’s an oversimplistic mathematical approach to filling vacancies – an unemployed sales person in Devon is hardly going to be able to fill a brain surgeon vacancy in Aberdeen (and there are an awful lot of unfilled vacancies in the NHS); but essentially it will drive many people, regardless of their skills or experience, into minimum wage jobs in sectors such as care regardless of their suitability for such a role. A means of fixing the social care crisis is something which this is not. It probably doesn’t matter to them though – low wage labour helps the profits of private care companies, and keeps down the cost of looking after the almost useless people (in capitalist terms) receiving the care.

It’s not the only way of organising a society or economy; we could instead start, as some of us do, from the basis that the purpose of an organised economy is to serve the members of society as a whole rather than assuming that those members exist only to serve the economy. It’s an idea which we’ve largely lost sight of, as we’ve swallowed the tenets of capitalist ideology. But we don’t even need to be as radical as that to see the essentially short-sighted nature of the Tory approach. Decent pensions and benefits – as well as paying a proper living wage – allow those currently regarded as useless to become useful even to capitalists, as consumers. It means spreading ‘consumption’ more evenly and fairly, but I’m sure some genius could come up with a good slogan to cover it – something like ‘levelling up’, maybe? Whereas failure to do so has the effect of concentrating wealth in ever-increasing quantities in ever fewer hands.

They get away with it though. They have managed to convince those in the middle that the problem is the poor, and convince the poor that the problem is the even poorer. And to convince both that immigrants are the problem. They get away with it, in short, because enough of us allow them to.

Customers and employees

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There was a report on Sunday claiming that the introduction of the national Living Wage will disproportionately affect Welsh jobs, because “we have a more economically instable (sic) environment".

I don’t doubt that for companies trading on the margins, any increase in costs could indeed tip the company into the red.  But how viable really, in economic terms, is any company which can only survive by paying its staff less than the amount which the government calculates they need to live on?  Paying staff a low wage and then depending on those staff receiving in-work benefits to survive is a form of back-door subsidy to any company affected; in essence it transfers part of the cost of wages from the employer to the state.  And since the state has no magic money tree, it transfers the cost of wages to taxation.

There was another aspect of this which struck me as well.  It was also stated that "We're seeing accelerated rates of shop closures in Wales - we're also seeing higher rates of footfall decline”.  I don’t doubt that; it's something we see in our towns regularly.  But the question is why it is happening.  At its simplest, people don’t feel that they have the money to spend by going to the shops and businesses.  Arguing that, therefore, wages should be kept low seems to me to be a somewhat curious response to a problem of a lack of money in the pockets of customers.

But it goes to the heart of the real problem which the businesses complaining about the living wage have.  They seem at times not to understand that employees are also customers – and it’s an underlying problem with the current economic paradigm in general.  Companies look at their own situation, and from that perspective, minimising wages can seem like a good idea.  But seen from a wider perspective, it’s simply a race to the bottom which nobody wins in the end.

The select few and the toiling masses

Tweet I’ve never had really had a great deal of time for this self-appointed organisation calling itself the “Taxpayers’ Alliance”.  I can’t argue with their right to put forward their views, but their name implies – entirely deliberately – that they somehow represent the views of taxpayers in general.  And the media seem to have fallen for it in a big way, giving them a platform for their views on just about anything, without ever seeming to question for whom they actually speak.

They certainly don’t speak for me, and I’m a taxpayer – according to my payslips anyway.  They’ve never asked this taxpayer what I think, nor any other taxpayer of my acquaintance.  And to hear them talk, one would conclude that the only matter of any interest to taxpayers is paying less tax; the services which those taxes pay for what all appear to be superfluous.

They excelled even themselves last week in their comments in response to Gwynedd Council’s proposal to move towards a living wage. Their Campaign Director said “The best way for politicians to help the low paid, whether they work for a council or in the private sector, is to cut their taxes, not increase taxes on low and middle earners to fund a pay rise for a select few”.

The paper’s lack of challenge to this statement was disappointing to say the least.  In essence, the Alliance seems to be saying that the best way to help those who are so low paid that they pay little tax anyway is to reduce the tax of those on middle and higher incomes rather than increasing the pay of those at the bottom.  Worse, they went as far as to describe the low paid as “a select few” (as opposed, presumably, to the millionaire masses who inhabit their world).

As I say, I can’t oppose anyone’s right to express a view.  I just wish that before reporting it as though it was a general statement on behalf of all taxpayers, our fearless reporters would do a little more to make it clear who this organisation is and for whom they actually speak. 

Abdicating power

Tweet The TUC claimed recently that low pay is costing the UK Treasury more than £3.2 billion in means tested benefits and tax credits, and called for the introduction of a living wage.  Well, they would say that, of course; but the argument that using tax revenues to top up wages of working people is an effective subsidy to underpaying companies is a compelling one.

Both the CBI and the FSB have responded – equally predictably, I suppose – by saying that businesses “can’t afford” to pay their employees a living wage.  In my mind, that simply raises a question as to whether the businesses concerned are actually economically viable concerns at all.

It isn’t just wages that are at issue here.  The same organisations complain – almost daily it seems – that they “can’t afford” to comply with environmental or health and safety legislation, and they “can’t afford” to pay business rates or other taxes.  What exactly can they afford?  Well, many of them seem to have no major problems in playing executive salaries – or shareholders’ dividends; but then that’s what they are in business for, not to pay their employees.

But here’s the thing – classical economics says that any company unable to charge a high enough price for its products and services to be able to pay its costs of production and still make a profit is simply not viable.  And surely, paying a wage which is adequate for employees to be able to live on without claiming benefits is – or should be – a basic minimum requirement when calculating the cost of production.  The fact that it clearly is not merely underlines where economic power actually lies.

The real question which needs to be addressed is about pricing, rather than cost.  Why is it that businesses are unable to charge prices at a level which enables them to cover the costs of production, rather than forcing down wages?

The answer they would give of course is “competition”.  They have to compete with other companies to sell their wares, and to do that they need to keep their prices down.  It’s another obvious conclusion of classical economics.  But the way they’re setting about ‘competing’ at present is little more than a race to the bottom.  And it's the employees who are paying the cost of that race.

There’s something of a vicious circle here.  They’re mostly competing with each other; the greatest rewards go to those who can most ruthlessly reduce the cost of labour.  If all of them had to pay a basic living wage, then they would all be subject to the same rules – and cost-cutting would have to focus elsewhere.

There is a complication when those companies are competing on a wider stage than merely the UK.  But allowing our wages to be set at a level which is primarily driven by competition with low-wage economies is just another example of abdicating responsibility and leaving power in the hands of multi-national capitalists rather than elected governments.

Jobs and Benefits

Tweet It is hard to argue with the basic premise behind Labour's proposed changes to the benefit system for the unemployed, namely that it was never the intention of the architects of our system of benefits that people should be able to choose to live on benefits rather than to work. And that remains as true today as ever. But it doesn't mean that the proposed reforms are right or fair, or even that they address the basic point.

I think that there would be almost universal agreement that there should be a proper system of decent benefits for those who are unable to work, and one aspect of the proposed changes which I welcome is the increase in the level of benefits for those in greatest need. I think that there is probably also agreement across the spectrum that it is right and proper for the government to be actively encouraging those who can work to seek and find employment, and even to make it clear that 'choosing' to stay on benefits is not an option. Although the tabloids significantly overplay this aspect, I think we all know that there are a minority of people who just don't want to work, and are happy to live on the benefits paid for by the rest of us.

Having said all that, I am deeply unhappy with some aspects of the proposed changes. It seems to me that, on the back of an attempt to be seen to be tackling the workshy, the government are in danger of transferring the blame for unemployment entirely onto the backs of the unemployed themselves.

I have some direct experience of the unemployment benefits system. A few years ago, after being gainfully employed continuously for over 30 years, I was made redundant, and looking for a new job. I found the so-called Jobcentres less than helpful. They weren't in the least interested in what experience I had or whether any job was relevant or suitable; only in why I hadn't applied for any and every vacancy advertised in the Jobcentre. It was clear that they were target-driven - and that their targets were more to do with reducing benefits paid than with matching people to jobs.

There is a valid question to be raised, of course, as to what extent people receiving benefits should be allowed to pick and choose which jobs they do – and I'm well aware that there are some who will find the flimsiest reason for rejecting any and every job. But surely we should at least make some sort of effort to put round pegs into round holes, rather than drawing a simplistic straight line between an unemployed person and a vacancy?

The idea that people should be forced to do 'useful community work' to earn their benefits sounds oh so logical; but it leaves me more than a little uncomfortable, especially since it seems that the government is planning to contract this aspect out and allow private companies to make a profit from this unpaid work. If this is work that needs to be done, why not call it a job and pay a wage, rather than paying private companies to manage people doing what looks like some sort of 'compulsory voluntary work'?

Another specific proposal which leaves me cold is the idea that lone parents should be forced back to work when their children reach the age of seven. Given all the government emphasis on the issues arising from alienated youth, is this really a sensible thing to be doing at so young an age?

So, should the government do nothing at all? No, of course not – but I think that there are other things that could and should be looked at.

We could end the scandal by which unscrupulous employers hide behind 'agencies' who supply them with workers, usually from overseas, who, when their 'rent', 'fees' and other charges are deducted, end up working for less than the minimum wage. For all the government denials, I have no doubt that, as well as exploiting the 'agency' staff, this has directly reduced the number of jobs available to local people in a number of areas.

Let's look at the reasons which keep those who want to work out of work – lack of availability of jobs, mismatch between skills and jobs, poor public transport to get them there and back, wages which, after paying for transport (and possibly childcare), leave them worse off than they are on benefits.

And we could implement the 'living wage' concept which Plaid have argued for in the past, rather than depending on the minimum wage legislation.

I accept that we need to change the culture of benefit-dependency into which some have fallen. It was a mistake for the government, a few years ago, to actively encourage people onto Incapacity Benefit, sometimes needlessly, in order to 'hide' them from the unemployment figures. Stigmatising all those who are out of work – including those on Incapacity Benefit – by implying that they are all workshy may buy a few headlines in the Daily Mail, but it doesn't solve the deep problems faced in some of our communities.