Thursday, 25 September 2014

WHY "INVESTMENT IN JOBS" IS A ROUTE TO LOW WAGES


Mr Miliband wants to raise the minimum wage to £8 by 2020. This could be worth £3,000 a year, he tells the Labour Party Conference, deftly multiplying the £1.50 increase by 40 hours and 52 weeks. Factor in inflation, however, and the result is less impressive: if RPI (which includes housing costs) continues at its 2014 average of 2.55%, this year's £6.50 will need to be £7.56 in 2020 just to keep up. Given how far average real wages have fallen in the past five years, even a real increase of nine pence a year over a five-year period might seem welcome. But it is hardly the stuff to bring conference to its feet.

The reasons for such a modest proposal are not difficult to trace. The Labour Party has a visceral fear of appearing "anti-business", and the knee-jerk response of business leaders to this policy when it was trailed last weekend suggests that their caution is, at the very least, understandable. Dark mutterings about the impact on jobs find a ready echo in many quarters: in a society in which paid employment remains the way in which most people access a share in society's wealth, the idea that "investment in jobs" is the key to growing the economy is not difficult to grasp.

Not difficult, but wrong, nonetheless; indeed "investment in jobs" is close to being an oxymoron. An economy that is advancing should not generate more paid work, but less. Producers invest in plant and equipment in order to do a given amount of productive work with fewer people. By increasing output per worker they become more productive, and it is only by increasing productivity in this way that the economy can truly grow. This is why, in 1930, the economist J M Keynes predicted that, a century on, people would only have to work 15 hours a week to lead comfortable lives.

Keynes's deadline is rapidly approaching, but the signs are that he could not have been more wrong. Productivity has risen enormously since 1930, it is true, but with no effective mechanism beyond paid work to distribute that wealth, the effect has stalled. An economy that is creating jobs is either growing so rapidly that technology cannot keep up, or it is going backwards, replacing technology with people because they are cheaper. The latter condition is now well established in Britain, where, although the technological possibilities are almost unlimited, productivity has fallen back, real wages are also falling and working hours are increasing. Many people work excessive hours, while others take multiple jobs. Most households now have two wage-earners (or would like to) which would be a big surprise to people of Keynes's time.

Government bragging about recent record levels of employment, therefore, completely misses the point. What matters is not the number of workers, but the amount of real wealth that each of them is producing, and since much employment is largely transactional in nature (i.e. it circulates existing wealth around the system, rather than producing real, new wealth) many people in work are probably producing less than they would do if left to their own devices. After all, much of what people do in their personal lives (housework, exercise, education, caring for children, the sick and elderly) is economically productive, even if the people who measure GDP do not recognise it as such.

Mr Miliband is right, therefore, to concentrate on raising wages. Low wage employment destroys, rather than creates, value, by devaluing the work that is being paid for at such lowly rates. High wages increase productivity by encouraging investment in productive technology. Such investment increases the total wealth in the economy, which means that there is more to go round. For this to happen however, wages need to rise a great deal faster than Labour is planning, and a parallel policy is needed to ensure that the wealth does, indeed, "go round" without recourse to millions of low paid jobs that send the process into reverse.

The terminology of redistribution may long have been banished from the party lexicon, but the challenge for Labour is to resurrect the "distribution question" in terms that reflect the success of a modern, productive economy rather than merely "soaking the rich". Political economics is the art of manipulating the levers of power in ways that produce social benefit, and if the manipulation is deliberately timid in order not to risk frightening the horses it is bound to fail.

The distribution of real wealth is the single greatest challenge to social policy in the 21st century, and a few frightened horses may be exactly what are needed to challenge the prevailing assumptions. More paid work is not the answer: about a third of Britain's GDP is already spent by government in redistributive ways (pensions, benefits, healthcare and education are the big ticket items) because the pay people receive for their work is not sufficient for them to purchase the goods and services that they need, and still it is nowhere near enough to meet the basics of a civilised society such as good housing and care services.

Mr Miliband's speech was strong on recognising the problems that society faces: his enthusiasm for meeting "real people" on his walkabouts can leave him in little doubt that the crisis many face is a real one. But a nine pence an hour real increase in low wages over the five year term of a Labour government is no substitute for the far more radical solutions that will be necessary to achieve the social justice for which he clearly yearns.

This article first appeared on Huffington Post

Wednesday, 3 September 2014

COMPASSIONATE POLITICS - WAS THIS A EUREKA MOMENT?

Even the Daily Mail was shocked. Perhaps that "even" is unwarranted. The Mail speaks for instinctive human responses, whether they are compassionate or cruel. In this case the parents of cancer patient Ashya King, who had withdrawn him from treatment in a hospital in Southampton, were imprisoned in Spain at the behest of British prosecutors, leaving the five-year old to fend for himself in a Malaga hospital. A petition to have them released rapidly garnered nearly a quarter of a million signatures, a campaign which deputy prime minister Nick Clegg was quick to support. The prime minister himself was reported to have weighed in, and police and the Crown Prosecution Service soon back-pedalled. By Tuesday night, the parents had been released and were travelling from Madrid to be reunited with their son.

Despite the bland formulation of the CPS spokesman, that "there is insufficient evidence for a realistic prospect of conviction for any criminal offence", it is hard to avoid the conclusion that human feeling has triumphed over insentient officialdom in this case. Irrespective of the rights and wrongs of the legal arguments, nobody, from the prime minister down, thought it was a good idea for a sick five-year old to be left in a foreign hospital without access to his parents.

Nobody thought so, and yet a bunch of officials in the Home Office appear to consider that it is a good idea for a 44 year old Wadih Chourey, who suffers from Down's Syndrome and is reported to be dependent upon the care of his brothers, to be deported to Lebanon, despite his family having lived peaceably in Britain for the past 17 years. It will be interesting to see whether local MP Vince Cable, who has intervened in the case, proves as influential on this occasion as did his senior government colleagues in the case of little Ashya.

Similarly, an individual identified only by the poetic moniker "Entry Clearance Officer 5" was the decision-maker who refused admission to the UK to the Jamaican sister of Oliver Cameron, the purpose of whose proposed visit was to donate a kidney to her brother after his own had failed. The report in The Independent noted that consideration had been given to the “compassionate aspects” of her case, which, if nothing else, provides a helpful yardstick to what is meant by "compassion" in official circles. This case also aroused significant popular protest, and the refusal was eventually overturned.

In all three of these cases, local residents have campaigned for a compassionate response, reminding us that whatever generalised negativity people may feel towards immigrants, asylum-seekers or people who appear to act against the interests of their children, the specific reaction of people who know the human beings in a case is almost invariably supportive. Most people, faced with a real situation involving real people, know what to do for the best. They do not need to be told.

All the more surprising, therefore, that government officials, who are supposed to know the real circumstances in every case, repeatedly make inhumane decisions. It is as if officialdom has become so obsessed with objectivity that it has determined that all considerations of human feeling are to be rigorously excluded from decision-making. In so reasoning it is forgetting that the human circumstances of each case are a central part of objective reality. Human beings are, objectively, emotional, sentient and vulnerable to distress, and to arbitrate upon their destinies without placing these characteristics at the centre of the decision-making process is inhumane by definition.

If a family has been settled in Britain for a number of years, if the children have grown up here and go the school here and have no real concept of a home elsewhere, the question of how they got here, is objectively, completely irrelevant. It might have been relevant once, but it is not any more. The objective circumstances are those that prevail at present; objectively, it would be inhumane to force such a family to break all their connections and return to another country, which they no longer call home.

That conclusion may be awkward for politicians beating the immigration drum, but they had better get used to it. Social media has made every local story a national concern, and unlike generalised prejudice such stories have a lasting impact. It is reasonable to expect that public policy be guided by the needs that arise from real human circumstances, and even politicians seem surprised, as the events of the last few days seem to indicate, when this does not happen.

That the two most senior politicians in the land have been so quick to condemn an unfeeling officialdom in Ashya's case could be an eureka moment, when the light dawns. But if you're a Down's Syndrome sufferer fighting deportation from your home of 17 years, don't count on it.