29 June 2018

By John Hendy QC, IER Chair

The sole justification for the policies of austerity inflicted on most of the peoples of the world has been that there is a structural deficit in the finances of government that must be reduced. That austerity has nearly everywhere increased those deficits came as a surprise to no-one. Indeed, austerity could have had no other consequence.

The policies of austerity – cutting taxes for the rich and public services for everyone else, driving down wages and driving up profits – are a manifestation of the dogma of neo-liberalism, or ‘laissez-faire’ as it was called in the nineteenth century.

This doctrine teaches that trade unions, collective bargaining and workers’ rights are all illegitimate since they interfere in the operation of a free market in labour which will reduce labour costs to the minimum necessary for workers to survive.

The real driver for the group of policies and actions taken by government in the name of austerity is the desire to increase the share of the national economy consisting of profits and decrease the share consisting of wages. To that end austerity has been a resounding success, particularly in the UK.

Cheap labour

The consequence of driving down the real value of wages is not just a painful cut in the standard of living of most people (so enhancing the wealth of the rich). It has also depressed demand causing the loss of tax revenue, whilst increasing the burden on the State of paying in-work benefits to prop up low wages. Competition has focused on cheap labour rather than on investment in greater efficiency and productivity. The UK has become one of the worst performing economies in Europe, saved only by a financial sector which is little more than a vast gambling machine.

The British workforce is now marked by the longest period of declining real wages for decades, gross inequalities of income between the few and the many and between men and women, insecure employment, precarious hours and income, exclusion from decision-making about their working lives, too many hours or too few, lack of dignity and respect, lack of facilities for the disabled and those caring for children, lack of opportunity for education and training, and low quality work.

Only one improvement has emerged from the policies of the last 40 years and that is an increase in the number of jobs and hence a decline in unemployment. But that apparent benefit is marred by the appalling quality of the terms and conditions of the new jobs, with successive governments favouring a permanent pool of unemployed to keep labour cheap.

Victorian values

Britain is now as unequal as it was at the end of the nineteenth century with all the repulsive consequences: Unequal life expectancies, differential physical and mental health, lack of social mobility, unemployment, drugs, crime, hopelessness – and so on. The share of the national cake occupied by wages must increase if any way is to be found out of the spiral of decline in Britain.

In Reconstruction after the crisis: a manifesto for collective bargaining and in A manifesto for labour law the Institute of Employment Rights made the case for the restoration of sectoral collective bargaining – that is collective bargaining on an industry by industry basis.

Collective bargaining of this kind was the policy of government for 75 years until Mrs Thatcher. It was the principal mechanism adopted in Britain and abroad to increase wages, stimulate demand and reinvigorate the economy to end the depression of the 1930s. The same remedy could be applied to the current crisis.

The reversal of government policy from 1980 onwards has caused collective bargaining coverage in Britain to plummet from protecting 82 per cent of workers in 1980 to 23 per cent today (and falling). Labour’s introduction of a statutory recognition procedure had negligible effect.

In western and northern Europe the average coverage remains at around 80 per cent (though, in the name of austerity, sectoral collective bargaining is being undermined in Europe).

The restoration of collective bargaining goes beyond stimulation of the economy. The loss of its protection has never been felt more keenly than now with a million people on zero hours contracts, permanent full-timers being substituted by temporary and agency workers, and a massive rise in the use of false self-employment.

Better bargain

Collective bargaining is the only way of giving workers an effective voice and power to prevent injustice in the workplace. Furthermore, collective bargaining is the only really effective means of making heard the worker voice. It is the only way by which the fundamental imbalance of power in the workplace may be redressed.

There is also a legal imperative that underpins the economic and social case to rebuild the wasteland of collective bargaining. Whether the government likes it or not, the UK (like other countries) has obligations to promote collective bargaining under international treaties signed by both Labour and Tory ministers since the end of the Second World War. The failure over the last 30 years to comply with its international legal obligations has made the UK a repeated international law breaker, as the international bodies have consistently found.

A fresh start is required and a much more ambitious collective bargaining strategy imposed, based on what we once had – and what successful European economies still have. We need multi–employer agreements that apply throughout each industrial sector, laying down terms and conditions that will apply as a matter of law to every worker, whether or not their employer recognises a union.

Enterprise level bargaining will thus also be stimulated to take place on the basic floor established by the sectoral collective agreement. The Labour Party is committed to ‘roll-out sectoral collective bargaining’ as its manifesto for the June 2017 election, For the many, not the few, promises.

The sceptics will say that it is all too difficult. But we have done it before, in the 1930s when wise minds realised that the crisis of the time could be solved only by raising wages, and that the only way to raise wages was to strengthen the collective bargaining structures first established by Parliament during the First World War to deal with the problems of reconstruction.

To achieve it will require the same commitment to the use of State resources today as it did then, most notably a commitment to create the structures within which collective bargaining takes place, to ensure that employers take part, and that the terms of collective agreements are observed.

It is a big challenge. But there really is no alternative.

Originally published by Hazards Magazine