From the TUC

Economics, fair wages and the rise of the machines

06 Nov 2013, by in Economics

I was in the audience at Battersea Power Station yesterday, to hear Ed Miliband’s speech about the cost of living crisis. During his speech, Ed mentioned that the Conservative’s seemed to have nothing to say in response to his initiative of a one-year tax break for companies paying the Living Wage.

As if he had heard, Daniel Finkelstein offers a response in today’s Times (£) . A Conservative peer, Danny the Fink, to use his Twitter tag, is probably too free-thinking and intellectually curious for us to deduce that his is the view of other Tories. Finkelstein concentrates on the economic value of low paid workers, compared to machines, in response to Ed’s initiative, so with my interest in industrial policy in mind, here is a reply from me.

Danny does not disagree that many families are struggling to cope with rising costs, even when both parents work. He acknowledges that the incomes of those at the top have risen sharply while others have lagged behind, blaming this development on low economic growth. He doesn’t’ disagree with Ed Miliband’s tax break plan, describing this as companies being given “a little nudge”. Danny describes this idea as “timid”, but argues that anything less timid, such as insisting that firms pay higher wages, would be disastrous.

But the crux of Finkelstein’s argument is that, in his words, “hard-working mainstream workers in Britain are feeling worse off because long-term trends have limited their value to the economy (not their moral worth or their intrinsic value, their value to the economy).” Specifically, those workers whose contribution can be replaced by machines have taken the biggest hit. A bit of redistribution is necessary, Danny says, and rules like the minimum wage are needed to protect against exploitation. But the best way to protect earnings is to introduce policies to stimulate economic growth and more education and skills so that people can become masters of computers, rather than the other way around. We need better maths, more science and a combination of technical knowledge with real-life problem-solving skills.

There’s a lot here that is hard to disagree with. My problem with this article is not what it says, but what it doesn’t say.

Danny says that, in the past 30 years, the proportion of national income going to wages has fallen while the proportion going to owners of capital has risen. Perhaps technology has had something to do with this trend, but it also coincides with the falling power of unions and the decline of collective bargaining over that time. No wonder employers’ organisations powerfully resist ideas such as a return to industry-level bargaining.

Danny also mentions economic value but not societal value. A couple of the questioners at yesterday’s Battersea Power Station event raised the issue of care, at both ends of the age spectrum, i.e. childcare and elderly care. Caring is often considered a low value, low skill job in the UK, while in Scandinavia it is seen as more highly skilled and is rewarded accordingly. That in turn depends on choices that we make about the kind of society we want to live in: in recent years, the UK has favoured “aspirational” policies, which we interpret as policies which allow and encourage those who can to become very rich. Scandinavia, by contrast, stresses greater equality and social harmony. Both of these options are available. It is up to us to choose which we prefer.

Working for the TUC, I have spent years trying to drum up support for more manufacturing in the UK, but I recognise that advanced economies have a large share of services too. I still believe that we can link economic, industrial, employment and environmental policy, so that we seek to develop industries that are both green and internationally tradable (witness Germany’s success in developing environmental technology) but that we also have one eye on the job potential of some industries over others. Again, this is done in Germany. If we have the capacity to create quality, well paying jobs in service sectors, should government not be exploring that as it thinks about industrial policy? There won’t be a perfect match of industries to jobs, but we could be doing better than we are today.

Finally, two thoughts about machines. First, they go wrong sometimes. From signal failures that cause train delays, to computer glitches, to the inevitable pre-Christmas news story about the gifts, ordered on-line, that won’t be turning up in time for the big day, we trust machines to do everything efficiently at our peril.

Second, at risk of sounding a bit touchy-feely, machines can be pretty soulless. Many of us are becoming concerned about the death of the high-street, for example, and the loss of community that that entails, due to on-line shopping. And perhaps Danny is right to say that “In law, surgery, accountancy, flying planes, making music, you name it, machines are increasingly able to do things that use to require humans.” But driving home from Brighton on Sunday, listening to Classic FM, I discovered Allegri’s Miserere, recorded by Harry Christophers and the Sixteen. It’s breathtaking! Don’t try to tell me that a computer could have sang like that!

5 Responses to Economics, fair wages and the rise of the machines

  1. Markus Petz
    Nov 6th 2013, 10:15 pm

    I see in this article you mention Union decline. I am interested to know what Touchstone thinks of the lobbying bill. Will you be affected by it? Is it really attacking unions and charities or is it a swipe at UKIP? Is there the same decline in Unions and Political Parties for the same reasons, that they are dinosaurs in relation to how people actually function in a globalized society?
    I don’t know but some analysis of this metalevel would be good.

  2. Heather Wakefield
    Nov 7th 2013, 5:42 am

    There is clearly a gender dimension to this issue too Tim. Many of those being hit hardest are women – many of whom do the caring and childcare work you mention. They are also those in many other ‘service’ occupations where technology is missing, in which the skills involved are seen as ‘natural’ for women to preform and therefore ‘unskilled’. It is also ’emotional labour’ which machines would find hard to reproduce.Those women have been undervalued too. Local government is a case in point. More than half a million workers – mostly women – now earn less than the Living Wage. Their pay has declined in the last 15 years. The gender composition of the decision-makers – in this case councillors – must be a factor here too. Over 60% of the ‘guvnors’ are men over 60, while 77% of the workforce are women. During a difficult pay negotiation some years ago, I was told by one of them – an ex-miner – that he didn’t know what I was making all the fuss about: “My wife does for nought what you are asking for more money for your members for”. It is emblazoned on my brain forever.

  3. Tim Page

    Tim Page
    Nov 7th 2013, 10:54 am

    Hi Heather and Markus,

    Thanks for commenting on my post. Heather, you couldn’t have picked a better time to raise the gender dimension of Living Wages, as Frances O’Grady, Gloria De Piero and Scarlet Harris have all posted on Touchstone today, discussing equal pay.

    You are quite right to raise the gender aspect of Living Wages. I hope to do some work in the next year, thinking about how an industrial strategy could specifically target the creation of quality, well-paying jobs in both the manufacturing and services sectors. Please feed into that work if you wish, helping to identify how such jobs could be available to women and men.

    Markus, the TUC sees the Lobbying Bill as an attack on democracy, as the emergency motion at our Congress stated. A copy of that motion is here:

    Best wishes

  4. Indy Neogy
    Nov 7th 2013, 7:45 pm

    Hi Tim,

    There’s a fascinating double page spread in the November 2013 edition of HBR.

    p38-39 “America’s Incredible Shrinking Information Sector” – and covers 2001-2011

    It provides some hints that Mr Finkelstein’s argument about “better maths, science and problem-solving” (etc.) is largely founded on a world that existed pre-2000. The new world doesn’t seem to particularly need (or at least pay for) more of those attributes…

  5. Indy Neogy
    Nov 7th 2013, 7:59 pm

    A further item that may be worth thinking about:

    Obviously there are questions to be asked about baselines and aggregate demand, but there’s a persistently circular logic about “value chains” and “skills” in the thinking of people like DF that is worth asking questions of.