Frances O’Grady: Why Britain finally deserves a pay rise

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THOUSANDS of people from across Yorkshire will travel to London by coach, train and car to take part in the TUC’s Britain Needs A Pay Rise march and rally on Saturday.

They, like those health workers who took part in a four-hour strike yesterday, want fair pay to be at the top of the political agenda as we head towards the election –and with good reason.

The Government says that the economy is growing. But that is not true for most people’s pay packets.

As the Governor of the Bank of England told last month’s TUC Congress, workers have suffered the deepest cut in wages since the 1920s. And you have to go right back to the 1870s to find a time when it took longer for wages to recover after a crash.

Workers in Yorkshire are, on average, £35 a week worse off since 2010 – that is the cost of a year’s worth of electricity, gas and water bills.

We have three big problems with pay.

Firstly, one in five workers in Yorkshire earns less than the living wage of £7.65 an hour, a number that rises to over one in three in constituencies like East Yorkshire and Barnsley East.

For women the situation is particularly bleak. In some parts of Yorkshire, such as Selby, Doncaster and East Riding, more than half the women with part-time
jobs earn less than the living wage. Try telling them they are sharing in the recovery.

Ministers celebrate new jobs. But what they do not say is that our economy has only become very good at creating low-paid jobs. And while there is nothing wrong with proper self-employment, too many of the recent self-employed are struggling to make ends meet. Others are pushed into self-employment by employers who do not even want to issue zero-hours contracts.

Our second big problem is that even those with steady jobs have not had pay rises that keep up with inflation, especially when we look at the
price of basics such as food, fuel and housing.

Hull is the only area left in Yorkshire where house prices are still less than four times the average local salary.

Even previously affordable areas, such as Bradford and Rotherham, are now out of reach for many local people with house prices at least five times their average wage.

Five is an important number here as the Bank of England has recently instructed banks to limit the proportion of mortgages they offer that are more than 4.5 times applicants’ salaries. If this trend continues, future generations have little hope of ever getting on the property ladder.

Our third big problem is growing wage inequality. In 1998 top chief executives earned 45 times than average workers’ pay – enough for anybody I’d say. However, they now earn 175 times the average salary.

That means top directors get paid more in two days than the vast majority of people earn in an entire year.

This should worry everyone. Those with the biggest pay packets may
dismiss this as the politics of envy, but income inequality is bad for the whole economy. It helped drive the financial crash as banks lent the savings of the wealthiest to those who borrowed to keep up their living standards when wages were not.

So how can we begin to fix these problems?

For a start, we need bolder increases to the minimum wage and an increased commitment to the living wage from employers in the public and private sector.

Employers in many sectors can afford to pay more without job losses. That’s why we need to find new ways for employers and unions to work together to set higher wages, agreed at a sector level by modern wages councils, so that workers and businesses can both get a fair deal.   

Secondly, we need greater collective bargaining to get wages rising back in line with prices. Even organisations like the International Monetary Fund (hardly a trade union mouthpiece) says that collective bargaining can increase wages for ordinary people.

And crucially, we need workers to sit on company boards and remuneration committees to tackle the issue of soar-away executive pay. A real recovery would ensure everyone got a fair share. That is why the TUC is organising the Britain Needs a Pay Rise march and rally in London on October 18. We hope you will join us.

Frances O’Grady is the TUC General Secretary.