As RSA Chairman Luke Johnson announced in his FT column yesterday, the Society is to hold a Jobs Summit in January at which a range of experts will offer ideas to get today’s labour market moving and to prepare the way for the jobs of tomorrow.
Some new data from the United States offers interesting food for thought ahead of the summit. As Robin Harding explains in the FT, the key figure is 58%...
‘That figure is the share of US national income that goes to workers as wages rather than to investors as profits and interest. It has fallen to its lowest level since records began after the Second World War and is part of the reason why incomes at the top – which tend to be earned from capital – have risen so much. If wages were at their post war average share of 63%, workers would earn an extra $740bn this year, about $5000 per worker.'
This is not only an issue of fairness, it also impinges directly on the economic crisis. For while many corporates are sitting on cash mountains (which they are not investing because of low demand and uncertainty about the future), were that money in the hands of workers they would presumably be out spending it.
The causes of this trend are complex but it seems reasonable to conclude that a combination of globalisation, technological change, and neo-liberal policy has led to a fundamental shift of power from workers and their agents on the one hand to owners, investors and their agents on the other.
The factors which govern the balance of power and wealth between owners and workers are all pointing to a further shift away from the latter. Tight labour markets favour workers but apart from some pockets of the economy high unemployment means the power lies with buyers - not sellers - of labour. Outside the public sector trade unions are now very weak. The Coalition is committed to less not more labour market regulation. Rising wage levels in developing countries will eventually lessen the impact of globalisation on developed world employment and wages, but only in the long run.
Perhaps one answer– and here I am well outside my comfort zone – is to provide carrot and stick incentives for companies and investors to put their money to work, especially in ways that boost wages or create jobs. One way is the idea floated in the Autumn Statement of investing pension funds in infrastructure projects, but the problem here is that this is a slow solution to an immediate crisis. Another – which could work much more quickly - would be some kind of deferred ‘use it or lose’ tax on company liquid assets.
As always, I am hoping for some enlightening comments on this post but I will also be nervously scanning my inbox. The last time I ventured into economic policy I got a polite but firm late night email from Jonathan Portes, Director of the National Institute of Economic and Social Research. I can’t recall the precise words he used but it was something like; ‘Hi Matthew, I really enjoyed your recent post about a bond to create jobs. Sadly, it was economically illiterate’.