Sunday, 20 July 2014

Trade unions: inequality busters!

Andrew Fisher, author of The Failed Experiment ... and how to build an economy that works on why the Tories are attacking trade unions
"It's class warfare. My class is winning" 
- Warren Buffett, US billionaire speculator 

The incomes of the richest 1% vs trade union membership

Yesterday I showed this graph during a talk at the SERTUC (the regional trade union council covering London and south east and eastern England). In my view it shows the effect strong trade unions have as a force for equality.

The original chart is one that appears in my book (without the added black line and right hand side vertical axis). It is borrowed from Professor Danny Dorling and shows how the incomes of the richest 1% (orange line) consistently declined from nearly 20% just after World War One down to around 6% in late 1970s.

So the elite had seen their share of the nation's income fall by two-thirds. Instead of grasping 18 times as much as the average person, by the time Harold Wilson was passing over power to Jim Callaghan the elite was having to scrape by on only 6 times as much.

As you can see the orange line has an inverse relationship with the black line - the level of trade union membership, which peaked in the 1970s at around 13 million.

But look at what happened post-1979, there was a sharp reversal of fortune ... and the rich amassed one. In just 30 years, 50 years of progress had been reversed. And the similar post-1979 reversal in trade union membership (the black line) shows how they did it.

It was a deliberate aim of the Thatcher government to attack unions. As her longest serving chancellor, Nigel Lawson, confided in his memoirs:
"a reduction in union power was an important aim of Conservative policy even though it was couched in language of checking abuse, democratising procedures, and so on."
Anti-union laws were as regular throughout the 1980s as welfare reform bills have been since the 1990s. The effect has been dramatic:
  • today there are only half as many trade union members as there were 35 years ago
  • while 85% of workers were covered by collecive bargaining agreements in 1979, today that figures is around 35%
  • unemployment was never above 1 million from 1945 to  1978. Since the early 1980s it has never been below 1.5 million
Much recent political commentary has focused on the recent sharp decline in wages, but this is only an intensification of a much longer term trend. In the mid 1970s, UK wages were worth 65% of GDP. Today that figure is less than 55%. Conversely the rate of corporate profit has increased from 13% to 21%.

The attack on trade unions is only one part of the story - but it is a major part of the reason why inequality has grown in the UK, why poverty, and particularly in-work poverty, is growing.

This has meant the rising burden of living standards is now paid for by the state - through tax credits and housing benefits. Whereas unions used to squeeze better deals out of employers, now the state subsidises low pay and corporate profit margins.

There could be no easier way for an incoming Labour government to reverse these trends than to strengthen the hand of trade unions.


Anonymous said...

Excellent presentation last Saturday to SERTUC. Somewhat hopeful for trade unions to address inequality.

The next government should raise the minimum wage - some jobs may go but increased wages would create growth hence increase employment.

This would result in savings from 'in-work' subsidies. Capital investment could be increased (housing and infrastructure)- BUT how do you prevent inflation?

Replace Corporation Tax and implenment industry specific taxes like tonnage tax in shipping.

Change yes - and would this find favour in the EU?

Allan Graveson.

Jeelani Mir said...

The french have much stronger trade union laws (which they are repealing) and yet unemployment is around 3 million. Stronger union laws probably make corporations shift labour outside the country. Am I right?