The European Commission’s Annual Growth Survey (AGS) published on 22 November, launching the 2018 European Semester of economic policy, includes a very welcome call for real wage growth to support domestic demand.
The ETUC has been insisting for years that sustainable recovery and growth can only be secured by higher wages to boost internal demand and reduce inequalities. But it rejects the view that wage growth should be limited to Member States with large budget surpluses, while countries with external debt should contain growth in labour costs. Upward wage convergence is needed throughout the EU to stop social dumping and combat damaging economic and social inequalities.
While the Commission’s draft Joint Employment Report points to an ongoing drop in unemployment to 7.5% (8.9% in the euro area) in September 2017, the lowest level since 2008, the labour market recovery is not reflected in wage growth. In several Member States, disposable incomes are still below pre-crisis levels.
The AGS states: “Faster real wage growth in the euro area as a whole would help to sustain domestic demand. Real convergence of living standards and income levels is central to achieving the Union’s objectives of economic and social cohesion and full employment.
“Growth in real wages, as a result of increased productivity, is crucial to reduce inequalities and ensure high standards of living. More dynamic wage developments, when translated into greater domestic demand, would support further the ongoing economic expansion.”
The trade union view
Responding to the AGS, the ETUC welcomes the Commission’s call for increases in real wages: the engine of inclusive growth. The Commission recognises what the ETUC has long been highlighting: that there is not enough convergence in living and working conditions across Europe. Investment, including public investment, is needed in every EU country, and pay rises for upward wage convergence across the whole EU are the only way to narrow the east-west pay gap.
The ETUC has urged the Commission to make economic policy recommendations to strengthen collective bargaining, and is pleased to note that the AGS recognises the social partners as essential stakeholders. According to the Survey, “the timely and meaningful involvement of social partners in the design, sequencing and implementation of reforms can improve ownership, impact and delivery. New forms of social dialogue, collective organisation and bargaining need to be developed to meet the challenges posed by new forms of work.”
Publication of the AGS came only days after the proclamation of the European Pillar of Social Rights. “We are not wasting time in making the pillar a reality,” pledged Employment Commissioner Marianne Thyssen. ” We are presenting a European Semester that puts the Pillar into practice, for a renewed convergence towards better working and living conditions between and within Member States.”
One of the 20 principles of the EPSR declares: “Workers have the right to fair wages that provide for a decent standard of living. Adequate minimum wages shall be ensured, in a way that provides for the satisfaction of the needs of the worker and his / her family in the light of national economic and social conditions, whilst safeguarding access to employment and incentives to seek work. In-work poverty shall be prevented. All wages shall be set in a transparent and predictable way according to national practices and respecting the autonomy of the social partners.” The ETUC is carefully monitoring these commitments to ensure they are translated into concrete action.
While in Britain…
On the same day, 22 November, the British government’s budget setting UK fiscal policy for the year ahead failed to do anything to reverse the downward trend in the value of workers’ wages. According to the Guardian, the new measures mean the higher pay that workers should have gained from the living wage scheme will not materialise. “The UK has experienced almost a lost decade of stagnating wages.”
“The news for workers gets worse and worse — this budget won’t give Britain the payrise it so badly needs,” commented TUC General Secretary Frances O’Grady. The TUC pointed out: “Public servants have been waiting seven years for the end of real terms wage cuts. But here the Chancellor [Finance Minister] had very little to say. The starkest story is around what’s happening to real wages. The Office for Budget Responsibility’s figures show that since March, the amount people are expected to earn in 2020/21 has fallen by £800 [€900] a year.”