Who’s to blame for low wages? How we reached the bottom well before the immigrants arrived
The current controversy about ‘strivers and skivers’ has at least flagged up for public attention the fact that there are an awful lot of low paid workers in Britain today. Of the 9.5 million households that will be negatively affected by the Welfare Benefits Uprating Bill currently going through Parliament, 7 million have at least one member who is in paid employment.
Commentators like Polly Toynbee have long argued that we ought to have a better understanding of how the welfare system functions, not so much as a hand-out to the poor, but a subsidy to employers which allows them to build a bare-subsistence wage structure into their business plans.
A segment of the Conservative Party has worked hard to implicate immigration in the restructuring of the jobs market around low wages been implicated in the creation of a low wage economy. In October last year Home Secretary Theresa May set out the argument that the Labour government had pursued an ‘open door’ policy on immigration as a form of incomes policy designed to contain pressure for wage increases.
The true story is, unsurprisingly, considerably more complex. What needs to be acknowledged is the fact UK governments have striven for many years for a series of social and economic mechanisms that had the objective of reversing the wage growth associated with the 1960s and 70s and pegging this back to levels which they believed were consistent with sustainable growth. In the early 1980s this was achieved through the imposition of a two year long recession which saw unemployment rise by 124% and the all-out assault on militant trade unionism.
Further periods of recession in the 1990s took unemployment back up to 10.7% by 1993. During this decade the first fruits of the latest phase of globalisation were also working their way into the economy, increasing competitive pressure on British businesses in manufacturing industries and requiring management to take a more proactive role in reducing wage costs.
This was the point the UK was at the turn of the millennium, with an economic landscape that had seen the virtual elimination of the country’s comparative advantage in producing the sort of relatively low value-added manufactured products that had once sustained hundreds of thousands of decently paid jobs. One of the most marked effects of these developments has been the growth of inequality over the course of these decades, with the share if national income going to those in the bottom ten per cent of the population falling by around 11% between 1978 and 2000.
Immigration’s late take-off
This record shows that the UK was already a lower wage economy at the time the immigration associated with the Labour government really started to take off. The issue that had to be contended with was how the authorities could plan for sustainable economic growth without disturbing the low wage foundations which had been laid by governments over the period 1979-1997.
An immigration policy geared towards supporting and expanding UK economy – which became the explicit objective of visa and border operations after 2000 – was undoubtedly part of New Labour’s plans during this period. With national unemployment at low levels there was limited scope to meet new demand for workers from the pool of the UK unemployed, so economic growth rapidly translated into growth in demand for migrant workers.
So what stopped this growth becoming growth in earnings levels as well? As we now know, and as the figures showing the numbers of working people earning wages which still need to be topped up with welfare benefits also shows, for a large part of the workforce the UK remained at the highpoint of the ‘good’ years – just before the crash in 2008 – a low wage jobs market. Was that the fault of the immigrants?
The answer is no. The factors containing wage growth throughout the noughties were pretty much the same as they had been in early decades – namely the restructuring of labour markets and supply chains along lines which emphasised flexibility bordering on the casualisation of large parts of the workforce.
Employment practices which had once been associated with a delinquent sector of employers, geared to extracting every ounce of value from the labour of the workforce with compensation and fringe benefits at minimal levels, has now become part of a scientific approach to management, with employment contracts and private sector employment agencies constantly innovating to retain the advantages that have been won over labour across the past thirty years.
Migrant workers adapt
However, there have been ways in which immigration has fed into this bigger picture of the consolidation of the low wage economy. In the mid-2000s newcomers arrived in the UK to looking for employment opportunities in an economy marked by strong management intent on cost-cutting on one hand, and weak trade unions and a feeble framework of employment protection law in the other. They were not responsible for creating this situation but having found themselves in the middle of it they adapted as best they could.
With many finding themselves moving on a continuum of employment opportunities marked by decent jobs at one end and grossly exploitative conditions of near slavery at the other, migrants have proven resilient in dealing with adversity, and even sometimes in turning it around. The levels of improvement in wages and working conditions have come about because of growing confidence in networking across migrant communities, involving a sharing of knowledge and experience in dealing with the worst examples of employment abuse, such as illegal deductions from earnings, and also increased ability to cash in on the advantages of high education standards and the possession of a good set of soft skills which employers are increasingly having to pay a premium wage rate for.
The point here is that migrants should not be seen as the cause of low wages across the UK economy, and neither are they powerless victims trapped within the system. Across the country their determination to deal with adversity, to show solidarity, and even to turn the situation around has meant that in many cases the presence of a high proportion of migrants in the workforce is becoming a good predictor of trade unionism and resistance to exploitation.
As working class living standards are pinched even further by the sort of welfare reform measures being rolled out in the government’s legislative programme it might be the case that we will all have to look more closely at the strategies for survival which have been developed by that group of workers whose access to benefits and services has always been held at minimal levels.
Stronger links between native workers and their migrant colleagues will be called for as a new wave of policies further hollowing living standards rolls out across the working population: firstly to build resilience allowing survival in harsh times, but then to move forward towards the building of an economy that offers decent jobs to all.