Image of Hammer and Sickle

New Communist Party of Britain

adopted December 2015

The attack on wages

Wages, the length of the working day, pensions, retirement age and job security are all elements of the social wage, which have been won by workers engaged in the class struggle against the ruling class and its representatives.

The Office for National Statistics Annual Survey of Hours and Earnings (ASHE) reported that in April 2014 the median weekly wage for workers on adult rates was £418, an increase of 40 per cent since 2000. It also reported that the pay gap had widened between rich and poor, with the top 10 per cent earning £911 per week, an increase of 45 per cent since 2000. Those in the bottom 10 per cent saw their incomes increase by just 35 per cent to £125 per week.

As prices have increased by 51 per cent since 2000 and median wages by just 40 per cent, there has been a significant erosion in living standards since 2000 equivalent to a pay cut of £33 per week.

In the 12 years to the end of 2013 inflation has been above the Bank of England's monthly annual rolling target of two per cent. Since the beginning of 2014 inflation has dropped each month such that by December 2014 it had dropped to 0.5% with the Bank of England anticipating it will remain low throughout 2015 and may even turn negative. One of the problems with inflation targeting is that it does not reflect the cumulative effect on wages or prices, for instance if inflation remains at 0% for the foreseeable future and wages don't increase workers are still £33 per week worse off in the long term.

The ruling class preferred method of controlling inflation has always been by increasing unemployment and reducing wages. In 2008 Mervyn King, the then governor of the Bank of England, stated that he wished to engineer just enough job losses to lower inflation to the two per cent target rate. In his time he did not succeed in reducing inflation but he did increase joblessness and reduce pay which was a contributory factor to the crisis of over‑production mentioned earlier.

The Bank of England is not congratulating itself on successfully defeating inflation and warned in February 2015 that “The fall in oil prices seen since mid‑2014 is, in part, likely to reflect a slowing in the outlook for global activity”. Herein lies a warning of a further crash to come even before we've recovered from the last one.

Another important source of income for the working class is pensions, which are deferred wages. Many workers are losing substantial amounts of future income due to the private provision of pensions and the method by which they are funded. Most employers have closed occupational defined benefit schemes in favour of defined contribution schemes. Defined benefit schemes paid pensions as a proportion of final salary whereas for defined contribution schemes the size of a pension is determined by the amount of money a worker can save over their working life, which is unprotected from the ups and downs of the stock and money markets.

Those workers who are still in defined benefit schemes have had the value of their future pensions considerably reduced by employers arbitrarily changing pension scheme rules to exclude pay increases from pensionable final salary, or lengthening the period over which it is calculated from, say, the last year to the last five years. Some have even changed the rules to career averages, reducing future pensions even more.

The last Labour government, in 2005, restricted pensions by halving the maximum level of inflation‑proofing that pensioners could enjoy from five per cent to 2.5 per cent. Employers, not unexpectedly, welcomed this as a sensible move as it would increase their profits by between £250 and £400 million a year.

Those workers who are in defined contribution schemes have to rely on the money markets or buy Government gilts, to build a fund with which to buy a pension on retirement. In recent years the value of these pension funds have been unpredictable being reliant on the stock markets.

If that was not bad enough the Labour government, in reacting to the crisis and in an attempt to save the banks and protect profits, introduced quantitative easing (QE), a scheme whereby the Bank of England printed money to buy financial assets from banks and private companies. Whilst this increased the amount of monies available for profit, it devalued the individual pension funds and future pensions of workers.

It is estimated that for someone, in a defined contribution scheme, to get an inflation‑linked pension that supplements the state pension to give an income of 60% of the median wage would require individual savings of about £150,000, for many an almost impossible target. The average is £40,000 which would buy a private pension of about £26 per week and if combined with the new state pension would give an income of £139 per week. This is half of what is regarded as the socially accepted level of income to stave of poverty which is two‑thirds of the median wage. Put another way workers in retirement are expected to live on less than half of the living wage. As has already been stated retirement income has been reduced by government and company attacks on pension scheme so much so that someone with the average pension pot would have expected £35 per week in 2008, but by 2015 this has reduced to £26 per week and has also been further eroded by inflation during the intervening 7 years.

For most with the prospect of retirement with an income that won't satisfy basic needs, it can be of little surprise that the proportion of workers working past retirement age has increased from 7.6 per cent in 1993 to 12 per cent by 2011 and 20 per cent by 2014. In a survey conducted in December 2014, 50 per cent said they will work past retirement age with almost one in 10 claiming they will work into their 70s. Many have no choice but to continue working because of the prospect of inadequate pensions.

For those in work, wage growth is being suppressed through a variety of mechanisms, such as forcing the most vulnerable into low‑wage and zero‑hour contract jobs and once there ensuring that they stay there. Low wages and bad contracts are a subsidy to capitalism and are for many wages are so low that a growing number of workers have become excluded and marginalised from participating in activities such as visits to friends, family, the cinema, theatre and other cultural, social, sporting and political activities, which in any decent society should be considered the norm for all. This deepening of the poverty trap and accompanying social exclusion brings about a reluctance amongst workers to fight for wage rises and increases.

To try and stop any fight back for higher wages successive governments have introduced various forms of in‑work tax credits to subsidise low wages and ultimately the bosses profits. However, in‑work tax credits such as the child tax credit now form a significant part of workers' wages so when the Conservative led government announced, in the summer of 2015, that threshold for tax credits would be reduced and additionally that for every £1 earned above the threshold 48p of benefit would be lost, in 2015/2016 the loss would “only” be 41p of benefit and there will be no benefit for the third or subsequent children. As a result a couple with 2 children will receive £1,248 less than they did in 2010 resulting in 300,000 more children living in poverty. This announcement came in the same week that a children's charity reported that 7.5 million children already lived in families dependant on tax credits for basics such as food and clothing.

The fight for higher wages and pensions has also been hamstrung by current anti‑trade union laws. In the past the boom and bust cycles, brought about by the incessant competition of capitals, has to a certain extent been smoothed by the relative strength of the labour movement. Organised workers have the potential to resist wage cuts during slumps and demand higher wages during the booms. The automatic stabilisers, notably social insurance payments and progressive income tax that go towards funding state welfare, also tend to dampen down cyclical fluctuations. The attack on trade union rights since the mid‑1970s, is one of the reasons why this slump has such a grip on Britain than anywhere else.

None of these stabilisers was yielded out of the wisdom of the capitalists, but rather as reluctant concessions to the organised strength and struggles of workers in trade unions and other anti‑monopoly forces.

There were 788,000 days of strike action in 2014 so despite the anti‑trade union legislation and the actions of the courts in invalidating strike ballots, workers are still challenging their employers on a wide range of issues including pay. However, this level of activity is still way short of what was happening during the period 1950 through to 1980 when the number of strike days was averaging over 5 million days a year. This reduction in strikes is one of the reasons why in 1976, 65 per cent of Britain's GDP was paid in wages but by 2012 this had declined to 54 per cent, equivalent to a £173 per week pay cut for those on the average weekly wage. This shows that it is only strike action that can force employers and the government to pay higher wages.

Wages and jobs are both undermined by the Government’s use of workfare schemes, which force the long‑term unemployed and the long‑term sick and disabled who are ruled to be “capable of doing some work” to work for nothing.

The employers using these back to work schemes include the public sector, the private sector and some charities. Apart from the injustice of forcing people to work for just their Jobs Seekers Allowance, every worker working on these schemes replaces a worker who could have been doing this job on significantly higher wages but who is instead pushed into unemployment. The only real beneficiaries are the employers who are getting free labour funded at a pittance by the taxpayers. There is no evidence that these schemes do lead to regular full time jobs for those forced into them.

Hard‑won wages and conditions agreements secured by unions are undermined when waged workers can be replaced by those on workfare schemes. It is not unknown in the public sector for people to be made redundant and later, as long‑term unemployed, be forced to do their old job for no wages.

All these real cuts in wages, pensions and benefits has resulted in 20 million people in Britain living in poverty, which is double what it was in 1983 and as wages are continued to be held back, benefits cut further with the role‑out of Universal Credit and the cut in state pensions from 2016, the numbers in poverty will increase. Of these 20 million in poverty more than half are in employment with 39% working full‑time and 13% in part‑time employment. Only 12% of people living in poverty are unemployed, while 11% are sick or disabled.

Almost 18 million live in inadequate housing conditions and that 12 million are too poor to take part in any basic social activity — such as entertaining friends or attending all the family occasions they would wish to. It suggests that one in three people cannot afford to heat their homes properly, while 4 million adults and children are not able to eat healthily.