From the TUC

Practical Predistribution

01 Jul 2013, by in Economics

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.

3 Responses to Practical Predistribution

  1. Adrian
    Jul 2nd 2013, 5:01 pm

    Obviously you STILL haven’t read my paper Duncan.

    If you want to address a problem like the imbalance between wages and profits that exists at the aggregate level, then I think it is better to have a policy that operates at the aggregate level. A macro lever that governments can adjust over time would therefore be more feasible in this respect. That’s why I advocate linking company tax rates to their Gini coefficients. See:
    How Taxing Companies According to their Gini Coefficients Could Reduce National Income Inequalities.A Case Study in Pre‐distribution
    at

    http://www.cnlfabiansociety.org.uk/CNL%20Publications.html

    While some of the policies you outline above may help (e.g. raising the national minimum wage, extending the living wage, and fuller employment), others such as extending collective bargaining look like they came from a typical union leader’s playbook of the 1970s. You and/or the report’s authors also don’t explain how you would ensure that these policies wouldn’t become inflationary as they were in the 60s, 70s and early 80s.

  2. The crisis in living standards & how to solve it | ToUChstone blog: A public policy blog from the TUC
    Aug 14th 2013, 1:44 pm

    […] needs to go beyond fiscal stimulus and look at wider issues about how wages are set in the UK. The TUC has recently published a pamphlet looking at this very topic. It identifies more than could be done with the minimum wage and the living wage and notes the […]

  3. Our living standards crisis can only be solved by boosting wages | Liberal Conspiracy
    Aug 14th 2013, 3:44 pm

    […] TUC has recently published a pamphlet looking at this very topic. It identifies more than could be done with the minimum wage and the living wage and notes the […]

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