Predistribution offers Labour a new and radical way forward

The fast track to jobs and growth is by boosting incomes through higher wages.

Ed Miliband may have at last found his intellectual mojo in the American "predistribution theory", which talks about fair wages, trade unions and the power balance at the workplace.  Whilist it might be hard to imagine Labour supporters chanting  ….."what do we want – more predistribution! And, when do we want it? – well, preferably a decade ago when real wages started to fall", the speech Miliband gave to the Policy Network conference could mark the start of something new and radical.  At the very least, a speech by a Labour leader about social justice at the workplace and the need to address in-work poverty through wage bargaining, rather than relying on hand-outs from the state, brings joy to those think-tankers on the centre-left who have been pointing out for sometime that the way forward must be to put more money in people’s pockets. 

The fast track to jobs and growth is by boosting real incomes through higher wages, with wealth distribution recalibrated away from the top 1% who have secured more than their fair share of productivity gains.  The Smith Institute’s evaluation of anti-poverty policies shows that efforts by all governments since 1980 (including New Labour) to reduce poverty and inequality were undermined by deregulation of the labour market.

Successive Conservative governments transformed the world of work through the erosion of employment protection rights, tight restrictions on trade unions, the abolition of wage floors (like the Fair Wages Resolution and wages councils), lower taxes for the better off, a deliberate effort to shift the balance of power at work in favour of employers and abandoning the commitment to full employment.  All of which had a disastrous impact on those on low and middle incomes.

Apart from the significant achievement of the National Minimum Wage, New Labour left much of the post-Thatcher settlement on the workplace intact. Miliband is right to say that there was too much reliance on tax credits to tackle inequality.  The history of New Labour’s efforts to reduce poverty and increase pay show that wages stagnated for the "squeezed middle" even at a time of economic growth, rising tax credits and near full employment.

Whilst all the talk has been about falling real wages and outrageous executive pay, little attention has been given to what we are going to do about it. Beecroft and ever more deregulation is the Tory response. Labour has opposed this, but without really setting out its own prescription. Part of the solution has to be reconnecting social and labour market policies. What we know is that policies that ensure a more equal distribution of rewards are most effective when they work in parallel with labour market institutions (notably, trade unions) that achieve a fairer distribution of incomes before the intervention of the tax and benefit system.

There’s unlikely to be a sudden increase in welfare payments, even under Labour. All political parties agree that the resources available for redistribution will be limited in the immediate future in order to tackle the deficit.  Redistribution remains essential if we are to narrow the wealth divide, but it is only possible now with a shift towards a fairer wage distribution -  and that entails a new contract between employees, unions and employers. Predistribution is about pay, but it is also about Miliband's concept of responsible capitalism.

The solutions are in, many ways, not new but need to be recast for today’s economy. There has to be more transparency in executive pay with an explicit obligation to publish the details of all directors pay packages in the annual reports of listed companies. Listed companies should also record the ratio of high pay to low pay, the distribution of pay across different levels of earnings and the number of workers in receipt of the minimum wage.

Whilst the minimum wage has made a difference for millions, unscrupulous employers continue to short change their staff. Ensuring that the minimum wage is effectively enforced and is fixed at the highest possible level before any negative employment effects appear should also be part of the solution.

Any future Labour government should also seek to reintroduce labour clauses in public contracts. This will not only increase the pay of those working in the public sector (or "para-state") but also set a benchmark for pay in the private sector.  There may also be role for wages councils, which set wage floors, and place peer pressure on employers to act fairly. The development, in partnership with employers, of programmes focused on raising skill levels, boosting productivity and improving the overall quality of employment at the bottom of the labour market will also help those on lower income.

And last (and not least) as we approach the TUC’s conference, any programme to ensure fair initial distribution of rewards most seriously look at collective bargaining and how workers can have greater power at the workplace. For too long there has been an imbalance of power in favour of owners over workers. This is not a small challenge given low levels of union membership density in the private sector, but there are other models including European Works Councils which can act as bulwark against excessive executive pay.

The challenge for Miliband and the Labour movement must be to turn predistribution theory into predistribution practice, which will inevitably mean new popular workplace policies and facing down the vested interests of big business, the right-wing media, and the Tory neo-liberals.  There are obvious political risks with this sort agenda, but the prize of a more equal society is never going to handed to Labour on a plate. 

Ed Miliband delivered a speech on predistribution at today's Policy Network conference. Photograph: Getty Images.

Paul Hackett is the director of The Smith Institute.

Photo: Getty Images
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The Fire Brigades Union reaffiliates to Labour - what does it mean?

Any union rejoining Labour will be welcomed by most in the party - but the impact on the party's internal politics will be smaller than you think.

The Fire Brigades Union (FBU) has voted to reaffiliate to the Labour party, in what is seen as a boost to Jeremy Corbyn. What does it mean for Labour’s internal politics?

Firstly, technically, the FBU has never affliated before as they are notionally part of the civil service - however, following the firefighters' strike in 2004, they decisively broke with Labour.

The main impact will be felt on the floor of Labour party conference. Although the FBU’s membership – at around 38,000 – is too small to have a material effect on the outcome of votes themselves, it will change the tenor of the motions put before party conference.

The FBU’s leadership is not only to the left of most unions in the Trades Union Congress (TUC), it is more inclined to bring motions relating to foreign affairs than other unions with similar politics (it is more internationalist in focus than, say, the PCS, another union that may affiliate due to Corbyn’s leadership). Motions on Israel/Palestine, the nuclear deterrent, and other issues, will find more support from FBU delegates than it has from other affiliated trade unions.

In terms of the balance of power between the affiliated unions themselves, the FBU’s re-entry into Labour politics is unlikely to be much of a gamechanger. Trade union positions, elected by trade union delegates at conference, are unlikely to be moved leftwards by the reaffiliation of the FBU. Unite, the GMB, Unison and Usdaw are all large enough to all-but-guarantee themselves a seat around the NEC. Community, a small centrist union, has already lost its place on the NEC in favour of the bakers’ union, which is more aligned to Tom Watson than Jeremy Corbyn.

Matt Wrack, the FBU’s General Secretary, will be a genuine ally to Corbyn and John McDonnell. Len McCluskey and Dave Prentis were both bounced into endorsing Corbyn by their executives and did so less than wholeheartedly. Tim Roache, the newly-elected General Secretary of the GMB, has publicly supported Corbyn but is seen as a more moderate voice at the TUC. Only Dave Ward of the Communication Workers’ Union, who lent staff and resources to both Corbyn’s campaign team and to the parliamentary staff of Corbyn and McDonnell, is truly on side.

The impact of reaffiliation may be felt more keenly in local parties. The FBU’s membership looks small in real terms compared Unite and Unison have memberships of over a million, while the GMB and Usdaw are around the half-a-million mark, but is much more impressive when you consider that there are just 48,000 firefighters in Britain. This may make them more likely to participate in internal elections than other affiliated trade unionists, just 60,000 of whom voted in the Labour leadership election in 2015. However, it is worth noting that it is statistically unlikely most firefighters are Corbynites - those that are will mostly have already joined themselves. The affiliation, while a morale boost for many in the Labour party, is unlikely to prove as significant to the direction of the party as the outcome of Unison’s general secretary election or the struggle for power at the top of Unite in 2018. 

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.