Tuesday, January 15, 2008
Wages, prices and profits posted by Richard Seymour
As teachers threaten strike action over public sector pay, Socialist Worker reminds us why. It isn't just the lousy 2.45% pay deal that Ed Balls has offered teachers, which amounts to an effective pay cut. The chart on the left shows projected inflation versus Brown's planned pay rates up until 2011, and as you can see, there's a year on year fall in spending power.
Part of the inflation is driven by rising global energy and commodity prices, while companies appear to be driving their prices up to make up shortfalls in profits or pay off debts. The most recent report suggests that food prices rose 5.9% year on year, and liquid fuels like heating oil rose 32 per cent. Our electricity and gas bills are going to go through the roof this year. Once again, prices are rising on essential goods in a way that will disproportionately hit the poor. (Parenthetically, I note that "stagflation" is the word on the New York streets, largely because of the horrific increase in import prices.)
The government's solution appears to be to stop us greedy bastards consuming so much with a modern day incomes policy. Your pay is apparently what's causing inflation and, well, they'll fix that in a hurry. Aside from pegging incomes for public sector workers, it looks as if the Bank of England will use any increase in inflation to maintain higher interest rates and thus curb consumption further. Interest repayments relative to disposable income are at a very high rate, averaging 19% just over a year ago according to a study by Price Waterhouse Coopers. In December it was revealed that 1 million people in the UK are having difficulty repaying their mortgages, which means borrowing more or extending the mortage. That also represents a reduction in disposable income.
SW points out that while median executive pay is up 7.8%, recent research that finds three quarters of monthly paid workers actually ran out of money in the last week of their pay run and have to subsist on a mixture of borrowing and scraping. No surprises there - practically everyone who isn't on an above-average income goes through this, and there are always nasty little shocks (a bill you forgot about, overdraft charges that the bank has just made up, a rise in minimum repayments on your credit card, a direct debit that bounces because you're fifty pence short, thus incurring another bank fee). And it's going to get tighter and tighter. As Larry Elliott relates, the government seems to be doing everything it can to take us back to the Bad Old Days Of The 1970s. As Elliott also points out, incomes policies have a way of collapsing within a short space of time. Are trade unionists really ready to believe that a country with a net worth of £6.5 trillion, where the Prime Minister has a bottomless pit to pay for war and is always ready to cut taxes for businesses while funding whatever ludicrous white elephant scheme he thinks fit, is unable to afford decent levels of public sector pay?