The US needs a debate on wages, not tax cuts

Wages have stagnated for 30 years - people just don't have enough money.

President Barack Obama is gleefully awaiting another showdown with Congressional Republicans over the question of whether to allow the Bush-era tax cuts to expire for the richest one per cent of Americans. 

I say "gleefully" for two reasons. One, Obama lost this fight last fall when Republicans forced him to trade extending tax cuts for extending jobless insurance. Yes, the GOP actually said it wouldn't give relief to the unemployed unless Obama agreed to give the rich more money, and Republicans didn't pay a political price for that. The other reason Obama is "gleefully" awaiting another showdown is that Republicans will finally pay that price in the form of their candidate, Mitt Romney.

Obama wants to extend the cuts on incomes under $250,000 a year but let them expire, as they are set to do at year's end, for people like himself who make more than $250,000. The Republicans are saying such a tax hike is going to hurt small business owners, which is what they usually say when they no plausible pretext for protecting the super-rich.

It's going to be fun to watch but we need more than fun in our political discourse. Far more than a debate on tax cuts, we need a debate on wages. We have paid the lowest tax rate in 30 years, according to the Congressional Budget Office. While that has surely mitigated the effects of the recession, it hasn't gotten us out of it, because the fundamental problem with the economy is that people don't have enough money. I'm not being cheeky. Wages have stagnated for 30 years.

More importantly, our conception of the recession is backwards. Lack of demand is what's keeping the economy from thriving, not supply. But we drank the Kool-Aid of supply-side economics back when Reagan was president, so it's no longer possible to see the importance of raising aggregate demand. The debate is so upside down now that a Republican Congressman from Florida, when asked recently if he'd support a bill to raise the minimum wage, actually said: "Get a job." US Rep. Bill Young didn't seem to understand that minimum wage-earners have jobs. They just want a living wage.

Fortunately, another Congressman, Democrat Jesse Jackson Jr. of Chicago, has introduced legislation to raise the federal minimum wage from $7.25 to $10 an hour (some states add to the federal rate for their own minimum wage). It's unlikely Congress will take up debate, not with an election looming, but even if it were to pass the bill by some miracle, it wouldn't be enough for a family of four to live above the poverty line.

It would come close but it could be much better.

In March, the lefty Center for Economic and Policy Research released a report using the three most commonly used benchmarks: inflation, average wages and productivity. If minimum wage kept up with inflation since 1968 (when minimum wage was at its peak value), it would be $10.52 an hour. If it kept up with the average production worker's earnings, it would be at $10.01. Both of these benchmarks have been stable over the years, but productivity has soared.

This means workers are working harder per hour but not being paid more for all that extra productivity. Workers give, bosses take. So if the minimum wage had kept up with labor productivity since 1968, then it would be a staggering $21.72 a hour. The CEPR report notes that if workers received only half the productivity gains, the wage would be $15.34. A quarter would be $12.25, all of which is far higher than today's paltry $7.25.

It's going to be a long time before we shift from a debate on tax cuts to a debate on wages, but it will happen. It's not a question of if. There are too many Americans struggling too hard to get by. And if the minimum wage rose to only $12.25 an hour, the president wouldn't be the only who's gleeful.

 

Workers are working harder per hour but not being paid for their extra productivity. Photograph: Getty Images
Getty
Show Hide image

Our union backed Brexit, but that doesn't mean scrapping freedom of movement

We can only improve the lives of our members, like those planning stike action at McDonalds, through solidarity.

The campaign to defend and extend free movement – highlighted by the launch of the Labour Campaign for Free Movement this month – is being seen in some circles as a back door strategy to re-run the EU referendum. If that was truly the case, then I don't think Unions like mine (the BFAWU) would be involved, especially as we campaigned to leave the EU ourselves.

In stark contrast to the rhetoric used by many sections of the Leave campaign, our argument wasn’t driven by fear and paranoia about migrant workers. A good number of the BFAWU’s membership is made up of workers not just from the EU, but from all corners of the world. They make a positive contribution to the industry that we represent. These people make a far larger and important contribution to our society and our communities than the wealthy Brexiteers, who sought to do nothing other than de-humanise them, cheered along by a rabid, right-wing press. 

Those who are calling for end to freedom of movement fail to realise that it’s people, rather than land and borders that makes the world we live in. Division works only in the interest of those that want to hold power, control, influence and wealth. Unfortunately, despite a rich history in terms of where division leads us, a good chunk of the UK population still falls for it. We believe that those who live and work here or in other countries should have their skills recognised and enjoy the same rights as those born in that country, including the democratic right to vote. 

Workers born outside of the UK contribute more than £328 million to the UK economy every day. Our NHS depends on their labour in order to keep it running; the leisure and hospitality industries depend on them in order to function; the food industry (including farming to a degree) is often propped up by their work.

The real architects of our misery and hardship reside in Westminster. It is they who introduced legislation designed to allow bosses to act with impunity and pay poverty wages. The only way we can really improve our lives is not as some would have you believe, by blaming other poor workers from other countries, it is through standing together in solidarity. By organising and combining that we become stronger as our fabulous members are showing through their decision to ballot for strike action in McDonalds.

Our members in McDonalds are both born in the UK and outside the UK, and where the bosses have separated groups of workers by pitting certain nationalities against each other, the workers organised have stood together and fought to win change for all, even organising themed social events to welcome each other in the face of the bosses ‘attempts to create divisions in the workplace.

Our union has held the long term view that we should have a planned economy with an ability to own and control the means of production. Our members saw the EU as a gravy train, working in the interests of wealthy elites and industrial scale tax avoidance. They felt that leaving the EU would give the UK the best opportunity to renationalise our key industries and begin a programme of manufacturing on a scale that would allow us to be self-sufficient and independent while enjoying solid trading relationships with other countries. Obviously, a key component in terms of facilitating this is continued freedom of movement.

Many of our members come from communities that voted to leave the EU. They are a reflection of real life that the movers and shakers in both the Leave and Remain campaigns took for granted. We weren’t surprised by the outcome of the EU referendum; after decades of politicians heaping blame on the EU for everything from the shape of fruit to personal hardship, what else could we possibly expect? However, we cannot allow migrant labour to remain as a political football to give succour to the prejudices of the uninformed. Given the same rights and freedoms as UK citizens, foreign workers have the ability to ensure that the UK actually makes a success of Brexit, one that benefits the many, rather than the few.

Ian Hodon is President of the Bakers and Allied Food Workers Union and founding signatory of the Labour Campaign for Free Movement.