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The Cost of Living Squeeze, Trade Unions and the Class Struggle

The Labour Party has made much of the so-called “cost of living squeeze” where inflation, until recently, has been increasing at a faster rate than wages and salaries. Labour believed the problem of the cost of living faced by workers was an electoral vote winner against the Tories until figures were released by the Office for National statistics (ONC) in April of this year showed inflation falling to 1.6 per cent and the unemployment rate dropping from 7.4 to 6.9 per cent. Real wages also increased by 1.7 per cent in the three months to February. The Conservatives now believe that they have the electoral advantage with rising employment, rising wages and lower inflation leading, they hope, to grateful workers voting them into power at the next General Election in May 2015.

The rise in pay used by the Tories to justify their “success” should be taken with a great deal of caution. The real wage increase of 1.75 per cent also included end-of-year bonuses, which distorts the figures somewhat. For example, in March 2014, 91,000 Waitrose and John Lewis employees received a “bonus” equivalent of 15 percent of their wages as did workers at JCB, the plant hire company owned by the Bamford family (at the height of the depression employers at JCB agreed to take wage cuts and “long unpaid holidays”).

The use of “bonuses” to boost earnings of employers begs the question why statisticians add-in the “salary” of the owners of a business of Partners, Directors and Chief executives when in reality they are, to all intents and purposes, profits? Lord Bamford, whose family owns JCB, has a fortune of £3.1bn, yet besides a flow of unearned income from his investments he also draws a chairman’s “salary” and most probably gets a “bonus” to. Unlike the workers at JCB, Bamford also dines with Mr Cameron and helps bankroll the Tory Party. The statistical anomalies of wage increases led Ben Chu in the INDEPENDENT to retell an old tale;

Four morose men are drinking in a pub when Bill gates walks in. “Cheer up lads”, exclaims one of the men. “The average wealth of the five of us has just gone through the roof (So real pay is rising for the first time in years? 17th April 2014)

Workers do worry about their wages and salaries, about keeping their jobs and about the cost of living. For over a hundred years this fear has been reflected in trade unions and others, occupying themselves with the statistical problems of measuring movements of wages and movement of prices. The result has not been of much use for the working class but it has been to governments and employers who both have a vested interest in the use of wage and price indexes for their own political end in the economic struggle against the working class.

The reason why trade unions became interested in wage and price statistics came about when they wanted more ammunition in their struggle to get better wages for their members than just relying on going out on strike. Trade unions presumed employers were reasonable people and would, if presented with the facts, increase wages and salaries if the cost of living was rising. Unfortunately for the trade unions, the employers were not reasonable but self-interested profit maximisers and such arguments about the cost of living rising were dismissed.

Matters were made worse for the trade unions when this indifference by employers let in the social reformers who now agitated for government legislation; first for a minimum wage and now for a “living wage”. These reformers were a mixture of philanthropists like the Joseph Rowntree Trust and opportunistic Labour supporters who saw in the enactment of a minimum wage and, more recently, living wage legislation, the means to get votes from non-Socialist workers.

Not that all employers were opposed to minimum wage legislation just as some of the large corporations today have shown support for a “living wage”. And it should not be forgotten that the first minimum wage legislation was passed in 1909 by Winston Churchill, then a Liberal. Churchill, no friend of the trade unions and working class, said:

It is a national evil that any class of Her Majesty’s subjects should receive less than a living wage in return for their utmost exertions… where you have what we call sweated trades, you have no organisation, no parity of bargaining, the good employer is undercut by the bad and the bad by the worst; the worker, whose whole livelihood depends upon the industry, is undersold by the worker who only takes up the trade as a second string… where these conditions prevail you have not a condition of progress, but a condition of progressive degeneration.

The Trade Boards of 1909 created four Trades Boards that set minimum wages which varied between industries for a number of sectors where "sweating" was generally regarded as a problem and where collective bargaining was not well established. But the employers and the government were not thereby committing themselves to the principle that all workers were to be guaranteed a job at a reasonable standard of living and protected from the effects of rising prices.

The large-scale capitalists were in favour of low-pay legislation because it gave them protection against the competition of low-priced goods produced by the “sweaters” and they and the government both had a long-term interest, industrial and military, in preventing the creation of masses of underfed and physical led sub-standard workers.

For the employers as a whole and for the government the paramount interest has always been the necessity of making a profit and keeping the profit-system functioning as smoothly as possible. This means that their overriding interest has always been, not in pushing wages up but in preventing them from rising to the point that profit is endangered.

So the cheers by the Tories that wages are now increasing faster than inflation is largely bogus. The last thing politicians want is for wages to rise and cut into the profits of the capitalist class.

Already the Bank of England and capitalism’s economists have warned against wage increases. If workers are successful in getting higher wage and salary increases in the near-future it will not be long before they will be lectured to for not being as productive as workers in countries like Germany and the US and for causing “wage inflation”. Workers will also be told that if wages increase at a rate unacceptable to the Bank of England it will raise interest rates (DAAILY TELEGRAPH April 17th 2014). A similar threat was made against the working class by Gordon Brown when he was Chancellor when workers were successfully increasing wages in the face of bitter employer retrenchment.

Of course, workers have no interest in whether interest rates are high or low but the attack of workers for struggling for higher wages shows the class nature of monetary policy pursued the Bank of England and the why economists in the City are quick off the mark to tell workers that higher wages and salaries will have to come with higher productivity.

The government’s retail price index to which the trade unions turn to set their bargaining for higher wages should be set in the real world of capitalism, the world of profit seeking exploitation. In a report of the cost of living in 2012 the TUC said that it was tracking the living standards of workers against the consumer price index (CPI) which showed that the poorest 10 percent of households were experiencing a higher inflation against income because they spent more on energy and food. The TUC report said:

The living standards Index shows that wages have been falling in real terms since May 2010. People will therefore need at least two years of real wage growth – fuelled by falling inflation and decent pay rises – to get back to the level on income they enjoyed in 2010…(Cost of Living is rising faster for the poorest households (http://www.tuc.org.uk/economic-analysis/labour-market/labour-market-and-economic-reports/cost-living)

The TUC is not making a case for workers to struggle for higher wages but for governments to increase the minimum wage or replace it altogether with the “living wage”. Rather than being a useful tool in the class struggle the TUC’s living standards tracker is an instrument of social reform to inform Labour Party policy making.

From a working class perspective, the cost of living index is not the real issue facing the working class nor is it the rate at which the minimum wage is set. Workers need to use trade union organisation as far as it can be used, to push up wages and salaries irrespective of the inflation rate, productivity, the movement of interest rates and the erroneous claims made for “wage inflation” by the employers’ economists.

And from the Socialist perspective the economic class struggle is a struggle which takes place on an uneven playing field and has been going on far too long. The employers not only enjoy the support of politicians, like Ed Miliband, David Cameron and nick Clegg, in the class struggle but they also own the means of production and distribution which is protected by the machinery of government, including the armed forces. So the class struggle has to be a conscious and political struggle to end wages and prices as well as the cost of living index. In short, it means the establishment of Socialism.

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