Today the TUC have published a new Touchstone Pamphlet from Howard Reed & Stewart Lansley. The whole thing can be downloaded here.
This is an important and timely publication. The TUC launched our “Britain Needs a Pay Rise” campaign three weeks ago and as I argued at the time, it is important to remember that Britain’s great wage squeeze predates the financial crisis.
Real wages are currently going through their longest squeeze since the 1870s and living standards have raced up the political agenda. Meanwhile last week’s GDP data suggested the UK’s current recovery is being propped up by a decline in the household savings ratio, rather than income growth.
Our current economic crisis is more than simple crisis of demand. Things started going wrong in the British economy before the crash – and one of those things was wage growth.
Today’s publication is about more than the need for better traditional macroeconomic policy – we do desperately need a fiscal stimulus, but a stimulus along isn’t enough. The aim of policy can’t simply be to return the economy to where it was in circa 2006.
I’ve argued that we need to think about economic reform in terms of changing our national business model. One important aspect of this is looking at how wages are set and how the gains from growth are distributed.
“How to Boost the Wage Share” looks at the practical impact of policies such as raising the national minimum wage, extending the living wage, fuller employment and (crucially) the role of extended collective bargaining through modern wages councils and new sector based institutions.
These policies would have immediate impact on wages, but the report also recognises that alone they are not enough.
Just as crucial in closing the wage gap is:
…a more active industrial strategy aimed at rebalancing the economy towards sectors that can support higher-waged employment.
We have heard a lot in recent months about the concept the ‘predistribution’, I think of this pamphlet as a guide to practical predistribution policies and strongly recommend taking a look at it.