Cooking the Books 2 – Economic leverage / Trust me…
Economic leverage
‘Workers face worst squeeze on real pay since 2022’ was the headline of an article in the Times (20 May) by its Economics Editor Mehreen Khan. In the first three months of this year, average weekly earnings increased by 3.4 percent, which was more or less the same as the rise in the Consumer Prices Index. ‘However’, Khan writes,
‘while real incomes are on course to flatline this year, the jump in global oil prices is expected to push annual inflation close to 4 per cent in the coming months’.
If average earnings go up by 3.4 percent and consumer prices go up by 4 percent, that’s a reduction in real pay for workers. So why don’t they simply go on strike and push up wages to keep up?
The answer is that workers don’t have the power to put up the price of what they have for sale — their labour power — just because they want to, even to cover a rise in the cost of what they need to produce what they are selling. They, like all other sellers, can only charge ‘what the market will bear’. And, as Khan and the economists she quotes note, the current state of the labour market will not allow an increase:
‘Rising prices, combined with a weakening job market — where unemployment has risen to 5 per cent — means workers are losing their bargaining power to demand pay rises, economists said.’
One of the economists, Josie Anderson of the financial services group Namura, used the term ‘soft labour market’. This doesn’t mean what you might expect — surely, the current labour market is a ‘hard’ one as far as workers are concerned? — until you realise she was writing from the employers’ point of view as buyers of labour power. An AI definition of the term (cobbled together from other definitions) makes this clear:
‘A soft labor market (also called a “cooling” or “loose” labour market) is an economic environment where the supply of available workers outpaces the demand for labour. In this climate, hiring slows down, job seekers face stiffer competition, and employers regain negotiating leverage.’
Whether or by how much real pay goes up or down is a question of the respective bargaining strength of employers and workers, which in turn depends on the state of the labour market, but that is not something we are usually told by the media. Normally the story is of greedy workers causing inflation by forcing employers to agree to excessive wage demands.
Sometimes workers are in a favourable bargaining position and can maintain or push up real pay: when business is booming, finding a job is easy, and employers are making good profits; this ‘hard’ labour market for employers gives workers some ‘negotiating leverage’. That is the time to strike or threaten to strike. But the reverse of this is a ‘soft’ labour market for employers; it is they who are then in a stronger bargaining position, as at present and, according to one of the economists, for the fourth time ‘in less than two decades’.
We are talking here just about changes in bargaining leverage over the shortish-time price of labour power. Ultimately, over wages, the capitalist class have the upper hand as they monopolise productive resources. This gives them leverage to force workers to sell their labour-power for a wage in the first place. There is no bargaining about this; it’s just a fact of capitalist life that is imposed on workers. The way out for them is political not economic: to take political action to make the means of life commonly owned and democratically controlled by the whole community. Then there will be no labour market and no wages system.
Remember Kaa, the snake in the cartoon version of The Jungle Book? A thoroughly dangerous and treacherous constrictor whose one interest in life is to get his coils around Mowgli and squeeze the life out of the poor lad.He nearly manages it too, with his hypnotic eyes and the lisped lyrics of a song that goes:
‘Trusst in me, jusst in me, shut your eyes and trusst in me’.
And if you were to look for a common denominator of all the reformist parties currently slithering around in front of the working class, whatever the details of the various plans they’ve hatched to ensure a wonderful future for the likes of you and me, it would surely be this plea to ‘Trusst in me’.
And they all echo one of Kaa’s follow-up lines, ‘You can sleep safe and sound, knowing I am around’.
And if you reckon that you will be able to sleep safe and sound by once again voting to hand over the administration of the capitalist system to any of these reformists, you are heading for yet another rude awakening. Because, as we will never tire of reminding you, the system cannot be made to work in the interest of the majority. The minority’s interest will and must always come first.
And unlike the fictional Kaa, who was after just one quick fatal squeeze, in the real world we’re trapped in the coils of a system that is designed to keep squeezing us to provide its owners with profit.
BUDGIE