By Frances O’Grady, TUC General Secretary
British workers are still taking home pay packets that are worth less than their wages before the financial crisis. They have suffered the longest pay squeeze since Queen Victoria was on the throne. And the real value of their wages has been falling again over the last five months.
The situation is particularly bleak for public sector workers. The UK’s hard-working teachers, nurses, firefighters and other public servants had their pay frozen from 2010 to 2013, and have been restricted to a pay rise cap of 1% in every year since.
During this time, they have had to work harder than ever to keep services running in the face of huge cutbacks and job losses. And their thanks for this? Being left thousands of pounds poorer each year.
The TUC has spent the last few years campaigning under the banner ‘Britain Needs a Pay Rise’ for a wages-led economic recovery. On Tuesday, we are holding a rally outside parliament to say ‘Britain Still Needs a Pay Rise’. And we’re demanding pay increases for public servants in future years that will restore the value lost from their earnings.
Cracks have started to appear in the government’s position. The 1% cap on pay rises had been intended to last until at least 2020. But it has now been announced that next year police officers will get a 2% pay rise, and prison officers 1.7%. And pay review bodies for some other public professions are being given similar leeway.
The government has presented this as if it is an end to the pay-cap policy. It might ease the cap, but with UK inflation running at 2.9%, an increase of 2% is still a real-terms pay cut. And there are many other public sector workers who are still stuck with the 1% cap for now.
All the same, it shows that the government is no longer able to hold its line on pay restrictions with a public whose sympathies are clearly with local nurses, teachers, firefighters, midwives and librarians. Government MPs got this message when they knocked on constituency doors during the general election campaign.
Crucially, the funding for public servant pay rises must come from the Treasury, and not departmental budgets. The resources for running public services have already been stretched beyond their limits. And public access to high-quality public services has suffered as a result. Take children’s centres, hundreds of which have closed. Or hospitals, where waiting lists have rocketed.
British workers have not suffered alone. All over Europe, working people have paid the price in their shrinking pay packets for a financial crisis created by private banks.
Not only has this been unfair, it is bad economics. Businesses need customers – but if customers are getting poorer by the year, businesses are going to suffer too. If Britain and Europe are to get back to an economically sustainable path, workers must have a fairer share of growth in their pay packets.
In Britain, we are already seeing how the failure to raise wages is pushing us closer to another crisis. Consumer debt is reaching record levels, as workers are forced to borrow more to keep up with rising household costs.
Consumer credit might keep the economy running for a while, but you soon run out of road. There are of course serious social problems that follow from severe indebtedness, causing terrible damage to people’s lives. But it also increases the risk of economic problems. If the economy is too dependent on credit-fuelled consumer demand, growth will evaporate when household savings are exhausted and credit cards reach their limit.
So giving Britain’s workers a pay rise – and giving Europe’s workers a pay rise – is not only a hard-earned right after years of falling wages. It is also vital to stable economic growth, and to our future prosperity.
But it is not going to happen unless we reprogram the economy to deliver higher wages. Too much power rests with the bosses of big businesses. Working people have too little voice, and too little power to back up their interests.
Unions must have stronger rights to organise workers – especially in sectors that are notorious for low pay and shady employment practices like zero-hour contracts and bogus self-employment. Collective bargaining rights must be strengthened. And in Britain, we need to catch up with most of Europe and modernise corporate boardrooms by requiring companies to have worker directors.