Why workplace democracy must be part of Labour's economic agenda

Strengthening workers' bargaining power can deliver fairer wages and more productive enterprises.

All orthodox economic commentary today is focused on the need for fiscal responsibility. Cutting the deficit is said to be a pre-requisite for growth. On the left, the argument is about short-term stimulus followed by longer-term prudence to get the economy back on track. Unfortunately, a small dose of Keynesianism, while welcome, will leave many of the problems that pre-date the crisis largely untouched.

First, governments of all political hues have failed to halt and reverse the enormous rise in income inequality that took place in the 1980s. Far from being a source of dynamism, excessive inequality is now seen as a cause of economic instability. The IMF argues that the pre-crisis bubble was a result of rising personal indebtedness driven by a growing gap between rich and poor. Their prescription for recovery is equally clear: wages must rise in line with productivity and the bargaining power of those with modest to low incomes must be improved. 

Second, the Labour government was successful in restoring full employment as an objective of public policy. But the net effect of this achievement was to move half a million people from workless to working poverty. Families continued to struggle to make ends meet, despite the minimum wage and tax credits. Wages at the bottom end of the labour market were simply too low.

Third, since 2004, wages for all those below the middle of the earnings distribution have been either frozen or have fallen once inflation is taken into account. Robust growth depends upon a steady stream of consumer demand but consumers are hardly likely to feel upbeat if their living standards are being squeezed.

Obviously the state has a role to pay in solving these problems by making full employment a priority and redistributing through the tax credits system. But the government cannot determine wages for all people at work. Rebalancing bargaining power depends on institutions that can represent workers interests effectively – a relationship that is explored in the Smith Institute’s latest report Just deserts? Poverty and income inequality: can workplace democracy make a difference? (July 2013, Coats). To use the US scholar Jacob Hacker’s formulation, pre-distribution matters.

The centre-left, then, has an opportunity to revive an argument that has been treated with contempt for far too long – that workplace democracy can deliver fairer wages and more productive enterprises. The international evidence is compelling: those countries with a fairer distribution of incomes, like the Nordic states and the Netherlands, have an array of institutions which create an inclusive labour market with decent work for all.

Productivity levels and the extent of innovation in German manufacturing are also looked on with envy by British policymakers. This impressive record is partly a result of effective industrial policy, but it depends just as much on the engagement of workers and their involvement in the process of incremental improvement. Works councils and trade unions, despite their weakened condition, remain central to the integrity of the German system. Britain presents a stark contrast, with an exceptionally low level of employee participation (only Lithuania is worse in the EU).

It would be wrong not to recognise the weakness of trade unions, especially in the private sector, even though the workers covered by collective agreements receive wages around 6% higher than those in a similar non-union firm. There is still a union 'sword of justice' effect, but it has become weaker as membership has fallen. Labour must think radically about how the state can facilitate the growth of effective workplace institutions. There is an irresistible case for learning from the works council models that are to be found in most EU 15 member states.

Rebalancing bargaining power means that the state has to re-establish its role as an exemplary contractor and employer too. The living wage should be used as the pay floor in public procurement and where negotiated rates of pay exist they should be observed by all those in the government’s supply chain, including sub-contractors. Beyond using the government’s contractual powers, the Low Pay Commission (LPC) should be given extended terms of reference to investigate the causes, consequences and cures of low pay. The LPC should also be required to develop principles of affordability, identifying when a rate above the minimum wage could be applied to an industry. And government should sponsor a dialogue on skills and productivity between all stakeholders (including the trade unions) in low wage industries.

The central element of Labour’s story has to be a reconceptualisation of the purposes of economic growth and the role of major corporations. It demands a return to the notion of stakeholding that was rapidly adopted and equally rapidly jettisoned by Tony Blair in the mid-1990s. That the architecture of British capitalism is broken should be a matter of consensus, if 'One Nation' means anything it surely means a broad agreement about the terms under which markets operate. Thoughtful Conservatives like Ferdinand Mount, who served as policy head to Margaret Thatcher, have begun to see the wisdom of two-tier corporate boards on the continental European model.  It would be odd if Labour missed the opportunity to develop an agenda for the reform of British capitalism

While it would be wrong to argue that the electorate have moved decisively to the left, there is a widespread belief that a return to the pre-crisis status quo is unacceptable. The possibility of a progressive post-Thatcherite settlement is tantalisingly close but triangulation and well-intentioned tinkering will prove inadequate to the task. Labour’s alternative has to include a progressive agenda for the world of work. Reducing income inequality and the extent of low pay is essential in convincing a sceptical electorate that the party has a credible economic programme.

David Coats is a research fellow at The Smith Institute

The group's new report can be read here

 

Ed Miliband and Ed Balls at the Labour conference in Manchester last year. Photograph: Getty Images.
Getty Images
Show Hide image

Is there such a thing as responsible betting?

Punters are encouraged to bet responsibly. What a laugh that is. It’s like encouraging drunks to get drunk responsibly, to crash our cars responsibly, murder each other responsibly.

I try not to watch the commercials between matches, or the studio discussions, or anything really, before or after, except for the match itself. And yet there is one person I never manage to escape properly – Ray Winstone. His cracked face, his mesmerising voice, his endlessly repeated spiel follow me across the room as I escape for the lav, the kitchen, the drinks cupboard.

I’m not sure which betting company he is shouting about, there are just so many of them, offering incredible odds and supposedly free bets. In the past six years, since the laws changed, TV betting adverts have increased by 600 per cent, all offering amazingly simple ways to lose money with just one tap on a smartphone.

The one I hate is the ad for BetVictor. The man who has been fronting it, appearing at windows or on roofs, who I assume is Victor, is just so slimy and horrible.

Betting firms are the ultimate football parasites, second in wealth only to kit manufacturers. They have perfected the capitalist’s art of using OPM (Other People’s Money). They’re not directly involved in football – say, in training or managing – yet they make millions off the back of its popularity. Many of the firms are based offshore in Gibraltar.

Football betting is not new. In the Fifties, my job every week at five o’clock was to sit beside my father’s bed, where he lay paralysed with MS, and write down the football results as they were read out on Sports Report. I had not to breathe, make silly remarks or guess the score. By the inflection in the announcer’s voice you could tell if it was an away win.

Earlier in the week I had filled in his Treble Chance on the Littlewoods pools. The “treble” part was because you had three chances: three points if the game you picked was a score draw, two for a goalless draw and one point for a home or away win. You chose eight games and had to reach 24 points, or as near as possible, then you were in the money.

“Not a damn sausage,” my father would say every week, once I’d marked and handed him back his predictions. He never did win a sausage.

Football pools began in the 1920s, the main ones being Littlewoods and Vernons, both based in Liverpool. They gave employment to thousands of bright young women who checked the results and sang in company choirs in their spare time. Each firm spent millions on advertising. In 1935, Littlewoods flew an aeroplane over London with a banner saying: Littlewoods Above All!

Postwar, they blossomed again, taking in £50m a year. The nation stopped at five on a Saturday to hear the scores, whether they were interested in football or not, hoping to get rich. BBC Sports Report began in 1948 with John Webster reading the results. James Alexander Gordon took over in 1974 – a voice soon familiar throughout the land.

These past few decades, football pools have been left behind, old-fashioned, low-tech, replaced by online betting using smartphones. The betting industry has totally rebooted itself. You can bet while the match is still on, trying to predict who will get the next goal, the next corner, the next throw-in. I made the last one up, but in theory you can bet instantly, on anything, at any time.

The soft sell is interesting. With the old football pools, we knew it was a remote flutter, hoping to make some money. Today the ads imply that betting on football somehow enhances the experience, adds to the enjoyment, involves you in the game itself, hence they show lads all together, drinking and laughing and putting on bets.

At the same time, punters are encouraged to do it responsibly. What a laugh that is. It’s like encouraging drunks to get drunk responsibly, to crash our cars responsibly, murder each other responsibly. Responsibly and respect are now two of the most meaningless words in the football language. People have been gambling, in some form, since the beginning, watching two raindrops drip down inside the cave, lying around in Roman bathhouses playing games. All they’ve done is to change the technology. You have to respect that.

Hunter Davies is a journalist, broadcaster and profilic author perhaps best known for writing about the Beatles. He is an ardent Tottenham fan and writes a regular column on football for the New Statesman.

This article first appeared in the 05 February 2015 issue of the New Statesman, Putin's war