Month: September 2007

The debate about wage discipline leaves a lot unsaid. Unions, government and employers all have their points of view but none can acknowledge the simple economic truth that underlies the need to keep salaries under control. It’s not a pleasant truth.

I think we’d rather not think about it. We ought to, though, because it’s fundamental to the fairness of our society which, as everyone knows, is now at an all time low.

It goes like this: to keep inflation under control we need to keep the wages of ordinary working people under control. Even where the wages of the those ordinary people aren’t the main problem we still need to keep them under control because… well… because we can. We can’t control the wages of the rich or even the fairly well off because they have market power. They have clout because they have skills that are in demand and jobs that are hard to fill.

Holding down the wages of people in highly-paid knowledge economy jobs will drive people to other markets and other sectors where there’s less pressure on earnings. So, poorer people, who can’t take off for another employer or jurisdiction with alacrity, take the brunt and the high-fliers float free. Gordon Brown doesn’t (can’t) go to the chartered accountants or the hedge fund managers and ask them to hold their wages down so he goes to the TUC instead.

Everyone knows this and – especially if you’re one of those low-paid workers – it leaves a really nasty taste in the mouth. Bitterness and conflict follow. Self-destructive, counter-productive and unpopular strikes will make things worse but they’ll happen anyway because that’s what you get when you make people feel undervalued. It hurts their feelings. They react negatively.

Brown will win this round: his speech at the TUC was politically brave, principled and economically sound but, let’s face it, deeply wounding to working people. Is there a way round this? Can a society behave properly towards its lowest-paid workers while observing liberal market orthodoxy and keeping inflation under control? Maybe.

Some economies seem to manage this balancing act. Nordic states where the gap between rich and poor is much smaller, for instance. But in these countries there’s a much more explicit social contract. People seem to accept that a fair deal for poorer workers requires fewer perks for the rich. Frustration and resentment are kept in check.

The other approach – one we seem to find equally unpalatable – would be to boost the marketability of those low-paid workers. Give them a bit of a kick up the arse and get them onto training courses and up the career ladder and into the protected class of higher value workers. There’s merit in this too – although it sounds a bit Norman Tebbit.

Poor people have low self-esteem (as a rule) and find it harder to improve their circumstances than people who already have. A bitter, defeated attitude is a necessary consequence. Direct action to improve people’s attitude to life, their aspirations and their prospects would help and trade unions might be just the people to deliver it.

What if the unions stopped organising disputes and started organising courses? What if they invested those still substantial union subs in colleges, stimulating publications and self-esteem workshops? I’m not joking. The new model trade union could be a capacity building club: an accessible, positive and self-aware institution whose primary goal is not defending the status quo but improving members’ prospects. Hopeless, I suppose.