Low wages equals low growth

22 Oct

I was interested to hear a report on the BBC News that George Osbourne, Chancellor of the Exchequer, (finance minister) will fail to make his target of reducing the borrowing requirement. It is increasing instead. One of the chief reasons for this is that so many people are so badly paid that they do not pay tax. In fact they require benefits in order to support themselves and their families. This is a double whammy for the treasury at a time when the fall in unemployment  numbers has been loudly trumpeted.

I have already described these employment figures as meaningless. The base line has been moved so often it is impossible to get an idea of the true figure. What is certain is that many of these new jobs pay very badly. The national minimum wage has not changed for many years, and is largely unenforced. Many of the jobs are part time on the minimum wage or involve ‘zero hours’ contracts. Worst of all are exclusive zero hours contracts, where no work is guaranteed, but you are not allowed to have other ‘jobs’. With such jobs you cannot get loans at decent rates, including mortgages.

Living costs are rising, so wages buy less. There is a slump in the High Street as many people have no spare cash to spend in shops. This depresses the entire economy. The value of labour is too low and the power too weighted towards the bad employers, allowing for real abuses to occur. Until wages rise and people have money to spend the economy will not recover.

Meanwhile, while the government fiddles the figures, the trust in politics and politicians is at an all-time low. Among working class white men there a huge surge in support for UKIP, almost solely on the myth that the party is somehow outside of the mainstream. This rise of a populist right wing party with links to neo-nazis is very worrying.

There is a long held belief that we are all in the same boat, and that when the water rises we all rise. Not so. Many people have already been thrown out of the boat and are economically drowning. Britain is the only G7 country where the gap between rich and poor has increased since 2000. We have food banks operating and many people are well below the poverty line in a supposedly rich country.

In the USA Warren Buffett was rankled by conservative implications that the President’s attempts to follow the “Buffett Rule” and raise taxes for the extremely wealthy to meet the rest of the nation was “class warfare.” He pointed out that, were it a war, it was pretty unfair since his side, the ultra rich, has the “nuclear bomb.”. In the UK things are worse. Class war has been declared, the rich have hijacked the boat we are all supposed to float in, and the government fiddles the figures while the state burns.

Support the campaign for real jobs.

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