Labour’s aims could be achieved through more effective collective bargaining

By Sarah Glenister, IER Staff

14 January 2014

In the run-up to the General Election next year, the Labour Party has begun to spell out its policies, hoping – it seems – to attract voters from all classes. The Institute of Employment Rights (IER) reiterates that more effective collective bargaining on a national scale is the solution Labour is looking for to achieve its aims.

This week, Ed Miliband wrote in The Daily Telegraph that he hoped to improve the lives of the “squeezed middle” by reducing living costs and raising wages. In the article, published yesterday (13 January 2014), the Labour leader highlighted a growing problem in the UK economy under the Coalition: the skewing of the labour market toward low-paid work.

Indeed, while the government has boasted about small rises in employment in recent months, these increases have often been reliant on people taking on jobs that provide a low income, part-time hours, or even a zero-hours contract. These positions add little to the economy, as a lack of disposable income among a great swathe of the population does nothing to improve spending and thus raise demand for products and services (which in turn creates jobs within the providers of those products and services).

Instead, the wages of many UK workers inevitably land in the coffers of utilities providers, landlords and financial services, where they are squirreled away (sometimes in overseas accounts), invested into already over-inflated areas of the economy or used to pay unearthly sums to executives and shareholders.

The IER does not only believe that this is unjust and immoral, but also reminds the Labour Party that this flow of wealth towards the already-rich, rather than allowing it to circulate freely around the economy, also stunts the UK’s growth.

It seems Miliband is well aware of not only the atrophying effects of neo-capitalism, but also of the undesirable impact it has on voters, promising the middle class that something will be done to improve their wages and their cost of living.

“There has been a hollowing-out of those white-collar professions that used to keep the middle class strong. According to government figures, the occupations that have suffered the largest falls in employment over the past 30 years are all in the middle,” he said.

“In the past three years, getting on for half of the new jobs created have been in low-pay industries and the average worker is now £1,600 worse off than before the election … One in three graduates has had to take a job, according to recent research, that used to be done by people who hadn’t gone to university. Three quarters of those who started out in low-paid work a decade ago have been unable to move into permanently well-paid work – while middle-class incomes have been harder hit than any other group during the recession, with wages declining by 10%,” Miliband added.

He vowed to set out a plan to reform finance, skills and wages while reducing the deficit, promising “better-paid jobs” and less “insecurity at work”. But his solutions to this ballooning and concerning issue are still somewhat vague.

The IER believes the answer should be obvious, and asks the Labour Party to look back to the great depression of the 1930s for clues. Now – as then – we should raise the voices of workers and give them a place around the negotiating table: a process known as collective bargaining. This strategy was once glorified by all political parties and is still used to great effect in some of Europe’s strongest economies – including Germany – but has fallen by the wayside as a result of Margaret Thatcher’s ideological campaign against trade unionism. We ask, what is wrong with workers coming together to negotiate for higher pay, better conditions and equal treatment?

With a rise in wages, not only will workers finally be able to pay their rent and bills without fear, they will also have a little extra left over to spend on our failing high streets, where local businesses can benefit from an increase in demand. This demand has historically been shown to trigger the creation of new jobs (which should also be paid fairly in order to continue the cycle of economic stimulation).

It seems that Labour already understands the value of increasing employment, with Shadow Housing Minister Emma Reynolds promising this week the party would create 230,000 new jobs in construction through the development of further council housing and the encouragement of businesses to start building.

Leader of construction union Ucatt, Steve Murphy, applauded this policy, quoted in the Morning Star as saying that Labour has “grasped the nettle that investment in housing, especially council housing, is the best possible way to boost the construction industry and create jobs”. The IER adds one caveat to Mr Murphy’s enthusiasm: that construction unions should be allowed to bargain for reasonable wages and conditions for the workers that are taken on.

Jobs are needed to kick start the economy, but not just any jobs. As Miliband seems all too aware in his Telegraph article, the creation of yet more low-paid or insecure positions is the last thing this country needs.

The Institute of Employment Rights’ Manifesto for Collective Bargaining – policy proposals for the next Labour government – is available to purchase here, while a summary of the manifesto can be accessed here