{"id":21426,"date":"2013-07-02T09:10:18","date_gmt":"2013-07-02T08:10:18","guid":{"rendered":"http:\/\/www.taxresearch.org.uk\/Blog\/?p=21426"},"modified":"2013-07-02T09:10:18","modified_gmt":"2013-07-02T08:10:18","slug":"how-to-boost-the-wage-share-which-is-the-pre-requisite-of-a-sustained-recovery","status":"publish","type":"post","link":"https:\/\/www.taxresearch.org.uk\/Blog\/2013\/07\/02\/how-to-boost-the-wage-share-which-is-the-pre-requisite-of-a-sustained-recovery\/","title":{"rendered":"How to boost the wage share – which is the pre-requisite of a sustained recovery"},"content":{"rendered":"

The TUC has published a new Touchstone pamphlet<\/a> by my good friends and colleagues Howard Reed and Stewart Lansley:<\/p>\n

\"Screen<\/a><\/p>\n

 <\/p>\n

As Christine Lagarde, Head of the IMF said in January this year:<\/p>\n

I believe that the economics profession and the\u00a0policy community have downplayed inequality for\u00a0too long \u2026 Now all of us have a better understanding\u00a0that a more equal distribution of income allows for\u00a0more economic stability, more sustained economic\u00a0growth, and healthier societies.<\/p><\/blockquote>\n

She is right. The share of wages in the overall income of our country has fallen for more than\u00a0thirty\u00a0years (this diagram comes from the pamphlet):<\/p>\n

\"Screen<\/a><\/p>\n

The result is a lack of purchasing power for ordinary people, growing inequality and a profound sense of social injustice. As a result Howard and Stewart argue that:<\/p>\n

Increasing the wage share is one of the key economic\u00a0policy challenges for the next decade. A rising wage\u00a0share will underpin higher living standards and allow\u00a0growth that is more sustainable and not reliant on\u00a0consumer debt. This study looks at what practical\u00a0steps policy makers could take from raising the\u00a0minimum wage through to an active industrial policy\u00a0in order to boost wages.<\/p><\/blockquote>\n

That is what we need. We do not need more profits for business to stash unproductively in tax havens and to leave unused when real\u00a0investment\u00a0in the economy is needed, as this diagram shows:<\/p>\n

\"Screen<\/a><\/p>\n

We need people who have the money they need to live lives of dignity.<\/span><\/p>\n

I argued on air yesterday when discussing MP's pay<\/a> that people joining unions and demanding fair pay for themselves, just as MPs were doing, was part of\u00a0the\u00a0solution to this problem, and I am convinced it is. Having any major political party that took the needs of working people seriously would also help but it goes beyond that. As Howard and Stewart also argue:<\/p>\n

Rebalancing the economy towards a higher overall and\u00a0\u2018lower half wage share\u2019, a reduced dependence on low pay and a smaller pay gap\u00a0would lead to stronger growth and less economic turbulence. While stemming and\u00a0reversing the trends of the last 30 years will be far from easy, and will have to be\u00a0secured gradually over time, the evidence is that doing so is a necessary step for\u00a0achieving sustained economic health.<\/p>\n

Achieving this rebalancing requires, above all, a new social contract with labour, or\u00a0what President Obama has called a new \u2018basic bargain\u2019 \u2014 one underpinned by a new\u00a0set of governing rules between the state, the workforce and business. In the UK, the\u00a0current contract has broken down. Growth no longer automatically delivers improved\u00a0living standards, while a large and growing proportion of the workforce is being denied\u00a0secure work and decent pay.<\/p>\n

The elements of this new social contract should be:<\/p>\n

\u2014 measures aimed at raising the earnings floor for those currently in work<\/p>\n

\u2014 measures aimed at capping excessive rewards at the top<\/p>\n

\u2014 measures aimed at increasing the extent of collective bargaining and workplace\u00a0participation<\/p>\n

\u2014 a new central commitment to policies that create full employment<\/p>\n

\u2014 longer term measures aimed at reversing the recent trends towards a low pay\u00a0economy.<\/p>\n

Rebalancing the economy in this way requires a mix of short-, medium- and\u00a0longer-term measures. These would aim first to raise wages in the bottom half of\u00a0the distribution and narrow the pay gap among the existing workforce. A second\u00a0group of longer term and more fundamental measures would then aim to alter\u00a0the structure of the workforce by reducing the economy\u2019s dependence on low paid sectors.<\/p><\/blockquote>\n

This is\u00a0precisely\u00a0the\u00a0sort\u00a0of thinking we need form the TUC right now. It is\u00a0what\u00a0Labour needs to hear.<\/p>\n","protected":false},"excerpt":{"rendered":"

The TUC has published a new Touchstone pamphlet by my good friends and colleagues Howard Reed and Stewart Lansley:   As Christine Lagarde, Head of
 Read the full article…<\/em><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[35],"tags":[],"class_list":["post-21426","post","type-post","status-publish","format-standard","hentry","category-economics"],"_links":{"self":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts\/21426","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/comments?post=21426"}],"version-history":[{"count":0,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts\/21426\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/media?parent=21426"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/categories?post=21426"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/tags?post=21426"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}