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The use of unemployment as a wage-depressor

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The use of unemployment as a wage-depressor

Post by skwalker1964 on Thu Oct 11, 2012 1:33 pm

This was posted as a comment on my blog today and I thought it worth sharing here. As I say, I didn't write it - if you want to see more by the author of the comment, visit

I don't think I'm contravening any intellectual property rules, but if I am, then apologies. Also, I'm posting this in UK Economics but always struggle to decide whether something like this is more political or more economical, so if the moderators want to move it please do!

Here's the comment:

The poor & vulnerable could be better protected if the neoliberal policy of inflation targeting was better understood by those on the Left. The scaremongering over 1970s inflation was used to reintroduce mass unemployment.

http://thetruthaboutunemployment.wordpress.com/2012/09/17/the-reintroduction-of-mass-unemployment-in-the-1970s-80s/

Keynesian economist Joan Robinson wrote in The Times in 1943 that:

Unemployment is not a mere accidental blemish in a private enterprise economy. On the contrary, it is part of the essential mechanism of the system, and has a definite function to fulfill.
The first function of unemployment (which has always existed in open or disguised forms) is that it maintains the authority of master over man. The master has normally been in a position to say: “If you don’t want the job, there are plenty of others who do.” When the man can say: “If you don’t want to employ me, there are plenty of others who will,” the situation is radically altered.


The use of unemployment to suppress wage inflation has been enshrined through the practice of inflation targeting, and the “best” type of unemployment was considered in the very candid minutes of the Bank of England`s Monetary Policy Committee in December 1997.

http://www.bankofengland.co.uk/publications/minutes/Documents/mpc/pdf/1997/mpc9712.pdf

On that occasion its concern was that the long-term unemployed were not “competing” and thereby, as it put it, not exerting as much “downward pressure on earnings” as the short-term unemployed. The following paragraphs taken from those minutes demonstrate the thinking (the letter “A” before each paragraph stands for Annex):

A41 The relationship between unemployment and earnings was then considered: in particular, did short-term unemployment exert more downward pressure on earnings than long-term unemployment?

A43 Whatever the reason, the implications for the effect of long-term unemployment on wage pressure were the same: when the proportion of long-term jobless was high, for a given level of total unemployment, workers would probably realise that they could not be replaced so easily, and hence that their bargaining strength was higher.

A44 The empirical evidence in general supported a more powerful role for short-term unemployment in putting downward pressure on wages. Some studies suggested that only short-term unemployment mattered. But recent Bank research had suggested that, although short-term unemployment was more important, the potential downward effect of long-term unemployment on wages should not be disregarded.

End of quote.

I can't find anything here I disagree with, but it's somehow shocking without being surprising that the B of E's MPC is ready to discuss/use unemployment as a tool quite so frankly!
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Re: The use of unemployment as a wage-depressor

Post by oftenwrong on Thu Oct 11, 2012 5:10 pm

The story comes from 1979 when Thatcher defeated the Wilson / Callaghan Government, and it is not fantasy to suggest that the people running The Bank of England were not unsympathetic to Conservative ideals.

Which probably hasn't changed a lot.
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Re: The use of unemployment as a wage-depressor

Post by skwalker1964 on Thu Oct 11, 2012 8:00 pm

The B of E paper is from 1997 - though that probably doesn't make much difference!
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Re: The use of unemployment as a wage-depressor

Post by JobSeeker on Mon Oct 15, 2012 12:15 am

No oftenwrong, as sk says it`s from [December] 1997. I`m grateful to sk for posting the comment I left on his blog a few days ago. It`s a shame OW is so partisan and naive as to think that Labour couldn`t be involved in something so despicable as using unemployment to discipline the working class.
In the 1970s it was the Labour government that deliberately increased unemployment (through cuts and interest rate rises) to almost 1.5 million in 1979. This allowed the Tory election campaign of 1979 to use the notorious poster with the words “Labour isn`t working”. Such an opportunity would not have existed without the real joblessness created by the policies of Labour governments over the previous five years. As we now know, Thatcher pushed unemployment much higher still.
http://thetruthaboutunemployment.wordpress.com/2012/09/17/the-reintroduction-of-mass-unemployment-in-the-1970s-80s/
Labour & Conservative parties play the role of good cop/bad cop to keep the public believing in the system.
In February 2008, when the prospect of a recession in the UK was being debated, the Daily Telegraph published a revealing interview
http://www.telegraph.co.uk/news/politics/1577313/Welfare-is-a-mess-says-adviser-David-Freud.html
with former City financier David Freud – who had been appointed by Prime Minister Tony Blair in 2006 to provide an “independent” review of the so-called welfare-to-work system - Gordon Brown chose to keep him on. In the interview Freud claimed that he thought it was possible to get “about 1.4 million back to work”. By the time the final question of the interview came around he seemed to have forgotten the need to pretend he favoured an economy with lower unemployment, and when asked whether he thought there will be a recession, he replied “Yes, because we should have recessions every five or six years and we are due one”. Curiously the interviewer asked no follow-up question to this intriguing reply! This little-known quote provides a sharp contrast to Gordon Brown`s claim to have put an end to boom & bust - now who do you think was being more honest?
One year later Freud jumped ship to the Tories who made him a Baron.
http://thetruthaboutunemployment.wordpress.com
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Re: The use of unemployment as a wage-depressor

Post by oftenwrong on Mon Oct 15, 2012 2:24 pm

Always good to read a totally unbiassed account of things, JobSeeker. How do you think that the PLP managed to swing a high-unemployment policy past the TUC without adverse commentary?
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Re: The use of unemployment as a wage-depressor

Post by witchfinder on Wed Oct 17, 2012 10:39 am

Recently in my home town, Sainsburys opened a new superstore, and when the plans went before the local council it was stated that upto 250 new jobs would be created.

Well now that the new store is up and running, Sainsburys let it slip that "we are employing almost 180 people", which of course is very different to the claim of 250 jobs, but the lack of honesty dosent end there.

The only other existing large supermarket in town made 25 people redundant as a result of the new store opening, meaning that Sainsburys created a net gain of about 150 jobs.

The vast majority of these new jobs are part time, there is nothing much for the man or woman who needs a full time job to sustain a reasonable standard of living, the retail sector has been a major driver in creating all the new private sector jobs, but very few of them are full time.

The present government is pushing down unemployment by forcing people into work that dosent pay, that will never provide a mortgage, that cannot sustain a family, low paid, part time, temporary, insecure, no permanent contract and no rights.

What kind of jobs are these ? and how will shelf stackers and home helps contribute to a return to growth. ?
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Re: The use of unemployment as a wage-depressor

Post by Tosh on Thu Oct 18, 2012 9:01 pm

Evolution is about adapting to new environments, I see no point in harping on about old employment traditions that are as redundant as the jobs themselves.

Wake up to reality folks, we must earn money in a globalised market, and if this involves a utiliterian male/female/part time/full time workforce then whining about it doesn't change the environment.

I am sorry but the utopia of a man working 37 hours a week to achieve a high quality of family life never existed for the unwashed masses in a protected and largely nationalised market, why you think this is achievable in a free competitive market is beyond me.
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Re: The use of unemployment as a wage-depressor

Post by oftenwrong on Thu Oct 18, 2012 11:06 pm

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Re: The use of unemployment as a wage-depressor

Post by witchfinder on Sat Oct 20, 2012 11:58 am

Tosh

If the vast majority of all these new jobs are part time ( which of course they are ), then how are people going to be able to afford a home, a mortgage, to get married and start a family.

this is what Tosh wrote:

"I am sorry but the utopia of a man working 37 hours a week to achieve a high quality of family"

Most people simply want a reasonable and decent standard of life, they just want to get by, pay their way, for many people this is not achievable and is just a dream.

Every time Morrisons or McDonalds announce a big expansion, we see David Cameron stood in front of camera, smiling and rubbing his hands "this is great news for the economy and good for jobs"; Its good for no one, its only good for people wanting a few hours work on minimum wages.

Where are the PROPER jobs, the manufacturing ones, the quality jobs, the ones which employ people on wages that can give people a reasonable standard of living.
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Re: The use of unemployment as a wage-depressor

Post by astra on Sat Oct 20, 2012 1:35 pm

Where are the PROPER jobs, the manufacturing ones, the quality jobs,


Mostly in Brazil now!
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Re: The use of unemployment as a wage-depressor

Post by boatlady on Sat Oct 20, 2012 6:55 pm

Couple of weeks ago, I met a bloke, 40 years old, works as a HGV driver (semi-skilled work?) 50-60 hours a week.
He can't make enough money to keep his wife and two school-age children - needs to claim Tax Credits and Housing Benefit to make ends meet.
Seems wrong to me that a man working all those hours is partly dependent on hand-outs from the State - shouldn't he be getting a living wage?
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Re: The use of unemployment as a wage-depressor

Post by bobby on Sat Oct 20, 2012 8:03 pm

Hello Don Mate, very glad to have you back.

boatlady said: I met a bloke, 40 years old, works as a HGV driver (semi-skilled work?) 50-60 hours a week.
He can't make enough money to keep his wife and two school-age children - needs to claim Tax Credits and Housing Benefit to make ends meet


Boatlady. It has allways struck me as wrong when an employer takes on an employee, and in doing so keeps that person away from his/her home for in excess of 40 hours a week, then pays so little the employee as you say has to go cap in hand to the State.

If you where to ask these unscrupulous employers why their pay is so low, their answer usually is “The business can not afford more” well if that is the truth of the matter (which in most cases I don’t believe it is) how can they think their business is viable when he/she expects to employee or/and the state to subsidise them. If their business is in such a mess, they should pull the plug and declare themselves insolvent. They really can't consider themselves solvent when they cant even pay their staff proper wages.
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Re: The use of unemployment as a wage-depressor

Post by oftenwrong on Sat Oct 20, 2012 11:06 pm

A proportion of HGV drivers are self-employed. I don't know enough about the logistics business to say whether they're better off than a wage-slave, but perhaps someone else here does.

(A human, I mean, not a tosh-like speak your weight machine).
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Re: The use of unemployment as a wage-depressor

Post by JobSeeker on Mon Oct 22, 2012 1:46 pm

oftenwrong,

You asked the following:
How do you think that the PLP (Parliamentary Labour Party) managed to swing a high-unemployment policy past the TUC without adverse commentary?

Answer: The same way that Labour managed to keep in place the anti-union legislation that the Tories put on the statute books, which meant that it was ready for the next Tory (oops Coalition!) government.

Anyway, most people don`t understand what lies behind the neoliberal policy of inflation targeting - namely, using unemployment to bear down on labour costs. Which is why I created the website:- http://thetruthaboutunemployment.wordpress.comhttp://thetruthaboutunemployment.wordpress.com

Please note that you are not to advertise your website in every posting you make. That counts as 'spamming' and will result in the deletion of your messages and possibly your account if it occurs again. Thank you. Ivan.
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Falling pay is the only crisis

Post by Chas Peeps on Sat Dec 07, 2013 2:39 pm

There seems to be a common consensus that the UK is in a state of slow but inevitable economic decline, largely due to the forces of globalisation.
 
It is worth noting here that the UK is still ranked to be the 5th – 6th largest economy in the world, despite our relatively small population and land mass.
 
For the Tory right representing 21st century capitalism, this gives them the reason and excuse to continue to cut public services and the welfare state at an ever increasing rate and to convince its working people that we must all accept lower and lower incomes to remain ‘competitive’.
 
For the social democrats (Blairite Labour Party), it causes them to argue that they are merely managers of this inevitable decline resulting from globalisation and that they will try their best to mitigate the impact on the most vulnerable members of society.
 
Both the Respect and Green Parties have a lot more of interest to say on the so called ‘decline’ of the UK but for various reasons, neither party is likely to command the 15-20% vote share necessary to exert meaningful influence over Parliamentary politics for the foreseeable future.
 
In my opinion, the 21st century capitalists have prevailed in the UK due to the collapse or substantial decline of the counterbalancing forces that used to exist within our democracy. These include (but are not limited to) a viable socialist political party, the trade unions, the church, academics and artists.
 
21st capitalism has ditched the idea that to be allowed to continue, capitalism needs to submit itself (reluctantly) to various measures of legitimisation to make it palatable to enough people for it to maintain sufficient support. 21st century capitalists believe that no such legitimisation is required and drive relentlessly towards profit maximisation, and cost minimisation. On the cost side this means ever lower pay and poorer conditions for workers and trans-national fixes to avoid corporate taxation.
 
It is common knowledge that the National Minimum Wage is less than the amount that people need to live on, even in full time jobs. This is further compounded by part time hours or zero hours contract arrangements. For people in work whose pay is not enough to live on, the general taxpayer is making up the difference in benefits and tax credits. A bigger evil is employers who deliberately keep their employees below the weekly number of hours required to accrue a National Insurance stamp towards the state pension. Millions of UK workers are now working for poverty pay and being given no chance to save towards a state pension. The taxpayer is subsidising their pay and will ultimately be expected to bail them out when they retire in destitution. This cost is being transferred directly to the employers in the form of increased profits. It represents a huge transfer of wealth from the taxpayer to private businesses and individuals.
 
The utter collaboration of the modern Labour Party with this totally immoral process simply beggars belief and in my view constitutes treachery against the people of the UK. The Tories are beyond criticism only because they are behaving entirely in the interests of those that back them – morally consistent but repugnant non-the-less.
 
With low pay, workers become a drain on the general taxpayer rather than BEING tax payers. They have little or no disposable income, further depressing the economy. They become unable to provide for their old age, putting a further strain on dwindling tax receipts.
 
The logic of 21st century capitalism is brutally simple. It leads to the dominance of the richest and most powerful in whom all wealth is concentrated. It doesn’t matter what it takes to deliver – rigged and anti-competitive markets, corruption of the political ruling class or other state apparatus, tax avoidance, the impoverishment of a nation’s people, social or economic crises or foreign wars to protect ‘interests’.
 
It is clear that the 20th century capitalists who had some degree of social responsibility have lost control of the monster. I am sure that they don’t know how to get it back in its cage. Our politicians no longer lead but merely manage this vast transfer of wealth from public to private hands.
 
I don’t pretend to know the future but if ever the battle lines were being drawn for a future political war, it is between the 21st century capitalists with its few super wealthy beneficiaries and all of the rest of us. I hope that the realisation dawns on enough people in time to reverse this process before the UK is bankrupt, without meaningful services or a welfare state and where most of its citizens are wage slaves destined for an old age of destitution.
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Re: The use of unemployment as a wage-depressor

Post by Bellatori on Thu Jan 16, 2014 7:54 pm

Osborne wants above-inflation minimum wage rise

[irony] Well that is that solved  sarcasm [/irony]

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Re: The use of unemployment as a wage-depressor

Post by methought on Sat Jan 18, 2014 10:46 pm

Osborne only said that because Milliband was going to promise much more - an actual 'living wage' which is more than £1 an hour more than an above-inflation minimum wage rise....

Milliband's words therefore were lost again
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Re: The use of unemployment as a wage-depressor

Post by Ivan on Wed Apr 16, 2014 8:41 pm



https://pbs.twimg.com/media/BlVAdqLCQAAytYR.jpg
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Re: The use of unemployment as a wage-depressor

Post by boatlady on Wed Apr 16, 2014 9:20 pm

Says it all
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Re: The use of unemployment as a wage-depressor

Post by oftenwrong on Wed Apr 16, 2014 11:23 pm

Any chance of getting that printed on the Ballot Paper?
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Re: The use of unemployment as a wage-depressor

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