Home England government UK government needs long-term plan for higher wages, not a fight with workers | Richard Partington

UK government needs long-term plan for higher wages, not a fight with workers | Richard Partington

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EEverywhere we look, the fabric of Britain is fraying to the seams. Railroad strikes, crumbling airports, severe staff shortages, soaring gas and food prices, the biggest drop in living standards since the 1950s.

As the biggest industrial dispute on the rail network in three decades is due to begin this week, the battle lines are being drawn. Alongside the succession of shocks wrought by the Covid pandemic and Russia’s war in Ukraine, Boris Johnson’s government will add another culprit to our palpable sense of national decline: the working people.

The tone could hardly be more different from last October, when the Prime Minister told the Conservative Party conference that Britain was on course to become a high-wage economy under his leadership. Business leaders have been warned to stop complaining about Brexit and staff shortages and instead told to raise wages.

Now the government is warning conditions are ripe for a dangerous ‘wage and price spiral’ that would force the Bank of England to raise interest rates even further to stifle inflation from the system – raising the specter of years 1970, when powerful unions raise wages, and with it inflation.

In the marked change, Treasury Chief Secretary Simon Clarke warned public sector workers in particular that they should not have “unrealistic expectations” about their pay, as the increases would only “prolong and intensify the cost of living crisis.

It was a revealing intervention, expressing a point of view held by high-ranking members of the cabinet. Although the public sector represents only 15% of the workforce, the Treasury believes that keeping wages in the sector can send a powerful message to the economy as a whole, helping to keep wage expectations at a low level. low level.

Over the next few weeks, annual pay plans for NHS staff, prison officers, teachers and civil servants will be revealed by the government. With all this talk of restraint, the signs are that a miserly settlement awaits. Bad luck for the heroes cheered in the coronavirus pandemic, now the villains of the play; cast as catalysts for our cost of living crisis.

None of this sits well with the promise of a high-wage economy. Nor to rebuild better or level up. “We’re not going back to the same old broken model,” Johnson told the Conservative Party conference last October. Has the Prime Minister changed his mind? If now is not a good time to abandon the low-wage economy that his party has presided over for 12 years, while working people are suffering the worst loss of living standards on record, when will it be?

Despite warnings about wages fueling the inflationary fire, there are few signs of a wage-price spiral taking hold.

The Bank of England estimates average wage growth across the economy, excluding bonuses, to be between 4% and 6%. Although well above pre-Covid rates, this hardly pulls the lights. With record vacancies and unemployment at a five-decade low – as well as the highest inflation in 40 years, which is already at 9% and heading towards 11%, according to the Bank – it may be more surprising that wages have not increased significantly. higher already.

There are sectors where wage increases are higher. Official figures show average wage growth, including bonuses, soared to 8% in the private sector due to windfall payments for city bankers and IT professionals. However, wage increases in the public sector languish at just 1.5%.

Last October, Boris Johnson told the Conservative Party conference that Britain was on course to become a high-wage economy under his leadership. Photography: Tayfun Salci/Zuma Press Wire/Rex/Shutterstock

All of this comes after the worst decade of real wage growth since the Napoleonic wars. Under the austerity measures the government now seems keen to recreate, public sector workers have been particularly hard hit.

Unions are bracing for a 3% pay rise for the NHS in England this year. While matching the wage deal agreed in 2021, this would mean a significant reduction in wages in real terms when adjusted for inflation, and would fall well short of income growth for the economy as a whole.

If ministers were to push through a 3 per cent settlement for NHS workers, the TUC estimates nurses and paramedics would face a £2,000 reduction in the inflation-adjusted value of their pay. For childminders this would represent a reduction in real terms of £1,200 and for hospital porters a reduction of £1,000.

Given weak wage growth and rising costs of living since 2010 after years of austerity, nurses are worse off by £5,200 a year. It’s no surprise that Britain’s public sector is fraying to the max. As wages rise at markedly faster rates in the private sector, the only spiral Johnson should worry about is the lengthening queue of health care workers leaving for better-paying jobs elsewhere.

Labor shortages are the biggest challenge facing the UK‘s health and social care system. The non-partisan Health Foundation think tank estimates that England’s NHS trusts alone face a staff shortage of 110,000. With Covid backlogs to deal with and an aging population, this will only grow. With new records for hospital waiting times revealed last week, the charity King’s Fund warned: ‘Until the government seizes the nettle on these staffing challenges, the NHS will not will not have the capacity it needs to provide the care patients need and deserve.

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So far, however, the government seems more eager to play politics than to come up with viable solutions. After Partygate, the Prime Minister fears giving in to the unions and setting a precedent, preferring to blame the strikes on Labor rather than his own shortcomings.

However, an action plan is urgently needed. To avoid a bleak future for jobs, the government must set out a roadmap to sustainably grow wages by boosting the productivity of the UK economy. Such conditions can allow wages to rise without fueling inflation. But where is the plan?

If the prime minister wants to build a high-wage economy, a good start would be to abandon the divide-and-rule tactic and get back to the table with unions and employers. Such coordination is common in European countries but seems anathema to a government more focused on ideological disputes.

Without a long-term plan and permanently stuck in campaign mode, Johnson chose to fight with the workers instead. This will only serve to fan the flames of a summer of discontent.