tag:theconversation.com,2011:/us/topics/wages-1237/articlesWages – The Conversation2024-03-24T11:32:14Ztag:theconversation.com,2011:article/2264742024-03-24T11:32:14Z2024-03-24T11:32:14ZAlbanese government to Fair Work Commission: Don’t let real wages go backwards for the low paid<p>The Albanese government will tell the Fair Work Commission it should ensure the real wages of low paid workers do not go backwards. </p>
<p>In its submission to the Annual Wage Review, the government stresses the July 1 tax cut should be on top of the wage increase for these workers, rather than a substitute for it. </p>
<p>The national minimum wage at present is just over $45,900 a year. This is about 55% of median full-time earnings. </p>
<p>The submission, to be handed to the commission on Thursday, says: “There is no sign of a wage-price spiral developing in Australia and medium-term inflation expectations are well anchored.</p>
<p>"Despite increases in nominal wages, and the return of annual real wages growth, the real value of award wages has been eroded in recent years given the global inflationary environment.</p>
<p>"Low paid workers and their families are particularly affected by cost-of-living pressures because they typically do not have savings to draw on to cover rising costs.”</p>
<p>The government’s position is in line with what it has put in its last two submissions to the commission.</p>
<p>The submission says inflation is expected to moderate further, which would improve real wages and ease some pressure on households.</p>
<p>“However, the current economic environment is challenging, with many households experiencing cost of living pressures.”</p>
<p>The tax cuts are “designed to be in addition to any increase in award and minimum wages” granted by the review. </p>
<h2>Gender to form part of the national wage case</h2>
<p>On the gender pay gap, the submission argues: “As women are disproportionately represented in low-paid and award-reliant jobs, increases in the minimum wage are likely to decrease the gender pay gap and increase the incentive to enter the workforce or work more hours.” This might increase the female participation rate.</p>
<p>The government’s December 2022 amendments to the Fair Work Act embed the principle of gender equality in the commission’s decision-making processes.</p>
<p>In April the commission will have before it research on gender pay equity it commissioned to inform its decision making processes. </p>
<p>The government has reserved the right to make a further submission when that research is published. The gender pay gap has fallen, and on one measure is currently 12%.</p>
<p>Earlier this month the Fair Work Commission awarded aged care workers a historic “work value” pay rise, worth <a href="https://www.abc.net.au/news/2024-03-15/aged-care-workers-pay-rise-case-ends/103591208">up to 28%.</a></p>
<h2>Low wage earners are the government’s priority</h2>
<p>The government says it is not suggesting that wages across the board should automatically increase with inflation, or that inflation should be the only consideration in determining wages.</p>
<p>“Over the longer-term, productivity is the key driver of real wage growth,” the submission says.</p>
<p>Annual real wages grew 0.1% through the year to the December quarter. For the first time in more than five years, quarterly real wages grew for three consecutive quarters. </p>
<p>Wages are growing at an annualised average of 4% under Labor, which is nearly double the average over the nine years before. </p>
<p>Last week’s unemployment figure surprised observers, falling to 3.7% in February, from 4.1% in January. </p>
<h2>Inflation update due this week</h2>
<p>Inflation has fallen to 4.1% through the year to the December quarter. Monthly inflation figures – which can be volatile – will be out on Wednesday. </p>
<p>The government has said that while inflation is still a primary challenge, the balance of risks is shifting to growth, which will be a main emphasis in the May budget.</p>
<p>Treasurer Jim Chalmers said: “While we’ve made welcome progress on inflation and seen a return to real wages growth earlier than forecast, many Australians are still under pressure – particularly low paid workers.”</p>
<p>Employment Minister Tony Burke said the government’s support for low paid workers had been “an essential part of returning to real wage growth”.</p>
<p>“After a decade where keeping wages low was a deliberate design feature this is what it looks like when a government deliberately gets wages moving,” he said.</p>
<p>Minister for Women Katy Gallagher said: “Women are disproportionately represented in low-paid and award reliant jobs, and we don’t want to see them going backwards in their pay.</p>
<p>"Despite the recent improvement in the gender pay gap, there remains a substantial disparity in earnings between men and women and we are committed to continue to work to close this gap.”</p><img src="https://counter.theconversation.com/content/226474/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michelle Grattan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The Albanese government in its yearly submission to the Annual Wage Review will argue that real wages of low paid workers should not go backwards.Michelle Grattan, Professorial Fellow, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2228972024-02-11T19:07:44Z2024-02-11T19:07:44ZHILDA data show women’s job prospects improving relative to men’s, and the COVID changes might have helped<figure><img src="https://images.theconversation.com/files/574298/original/file-20240208-30-m3prdb.png?ixlib=rb-1.1.0&rect=215%2C257%2C3550%2C1856&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/business-people-shaking-hands-finishing-meeting-605124179">Shutterstock</a></span></figcaption></figure><p>The latest <a href="https://melbourneinstitute.unimelb.edu.au/hilda/publications/hilda-statistical-reports">HILDA survey</a> shows Australia’s gender gap in employment continuing to close, with progress beginning on the earnings gap. </p>
<p>Remarkably, the progress has continued notwithstanding the disruptions caused by COVID; there are indications they may even have helped.</p>
<p>Funded by the Australian government and managed by the Melbourne Institute, the Household, Income and Labour Dynamics in Australia (HILDA) survey is one of Australia’s most valuable social research tools.</p>
<p>HILDA examined the lives of 14,000 Australians in 2001 and has kept coming back each year to discover what has changed. By surveying their children as well, and in future surveying their grandchildren, it is building up a long-term picture of how the lives of Australians are changing.</p>
<h2>Employment lifting</h2>
<p>The full span of the surveys through to the results for 2021 released this morning shows shows the proportion of women aged 18 to 64 in paid employment climbed from 64.3% in 2001 to 74.1% in 2019 before dipping during COVID and then bouncing back.</p>
<p>Separate labour force figures collected by the Bureau of Statistics suggest it might be as high as <a href="https://www.abs.gov.au/statistics/labour/employment-and-unemployment/labour-force-australia-detailed/dec-2023#all-data-downloads">76%</a> by now, indicating that COVID may have merely dented rather than turned back progress.</p>
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<p>For men of that age, the proportion in paid employment has changed little during those two decades, fluctuating between 80% and 84%, allowing the gap in employment between men and women to narrow eight percentage points.</p>
<p>Older women aged 65 to 69 are also much more likely to be employed. Most of the gain has taken place since 2009 when one in ten women of that age were in paid employment, a figure that has since climbed to one in four, not too far off the one in three men of that age employed.</p>
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Read more:
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<p>Much of the increase would be due to the phased increase in the female pension age between <a href="https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/rp/rp1314/SuperChron">1995 and 2004</a> and the further increase in both the male and female pension age between <a href="https://ministers.treasury.gov.au/ministers/wayne-swan-2007/media-releases/secure-and-sustainable-pension-reform-age-pension-age">2017 and 2023</a>. Broader social and economic changes such as the increase in two-earner couples will have also played a role.</p>
<p>While men remain well ahead in full-time employment, that gap is narrowing too. The proportion of women aged 18 to 64 employed full-time has climbed from around 35% to around 40% while the proportion for men has stayed close to 70%.</p>
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<p><a href="https://melbourneinstitute.unimelb.edu.au/__data/assets/pdf_file/0009/2874177/HILDA-report_Low-Res_10.10.18.pdf">Previous HILDA reports</a> have shown the arrival of children remains an important driver of divergence in the labour market experiences of men and women.</p>
<p>The arrival of a couple’s first child sees hours of paid work of the mother plummet and in many cases not recover for more than a decade. It has almost no effect on the paid working time of fathers. </p>
<p>Time spent on housework and child care, by contrast, rises dramatically for mothers and actually falls slightly for fathers.</p>
<p>If the gender gap in employment is to be eliminated, it is clear couples with children will need to share the load more equally. </p>
<h2>Wages lifting</h2>
<p>Male and female earnings have been converging slower than male and female employment, but the pace has picked up.</p>
<p>In 2001, women employed full-time earned on average 79% of what men earned. As recently as 2016, they still earned only 78% of what men earned. </p>
<p>But, since then, their earnings relative to male earnings have shot up, hitting 86% in 2021. </p>
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<p>The gap in earnings of all employees – full-time and part-time – is greater because women are more likely to be employed part-time, but growth in the number of women employed full-time means this gap is closing faster. Average female earnings have climbed from 66% of male earnings in 2001 to 75% in 2021.</p>
<h2>How COVID might have helped</h2>
<p>While the pandemic seemed to hurt women’s employment prospects <a href="https://grattan.edu.au/report/womens-work/">more</a> than men’s, longer term it seems to be improving the relative position of women.</p>
<p>HILDA shows the proportion of employees working from home in 2020 and 2021 has increased substantially. </p>
<p>The proportion working any hours at home climbed from 25.1% in 2019 to 37.3% in 2021. The proportion working only at home climbed from 3.5% to 17.7%. </p>
<p>There has also been a sizeable rise in the proportion of employees reporting an entitlement to work from home, from 35% in 2019 to 45%. </p>
<p>While the increases were greatest in the regions that experienced extensive lockdowns – Victoria, NSW and the ACT – working from home increased in almost all parts of Australia.</p>
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Read more:
<a href="https://theconversation.com/hilda-finds-working-from-home-boosts-womens-job-satisfaction-more-than-mens-and-that-has-a-downside-195641">HILDA finds working from home boosts women's job satisfaction more than men's, and that has a downside</a>
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<p>HILDA shows women have been more likely to work from home than men since COVID, even after accounting for differences in the occupations and industries in which they work.</p>
<p>This is probably because of an increase in the number and types of jobs that can be worked at home by mothers with caring responsibilities. </p>
<p>But this latest 2021 HILDA survey also reveals another gender gap in the labour market: women are more likely to work while unwell, including working at the workplace while unwell. </p>
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<p>There are health risks from working from home while unwell and also career risks from working at home. Being physically present in the workplace is likely to assist with <a href="https://theconversation.com/hilda-finds-working-from-home-boosts-womens-job-satisfaction-more-than-mens-and-that-has-a-downside-195641">career advancement</a>.</p>
<p>“Out of sight” can mean “out of mind” when it comes to promotions.</p>
<h2>Some small steps on sharing the caring</h2>
<p>Also providing a glimmer of hope for closing the gender gaps in the labour market is that, among parents with children, we’ve seen an increase in the time men have been spending on household chores and looking after the children. </p>
<p>The improvement accelerated slightly in 2020 and 2021, via both an increase in the hours worked on domestic chores by men and a slight decrease for women. </p>
<p>But there is a long way to go. In 2021, mothers of dependent children were still spending 75% more time on unpaid housework and child care than their male partners.</p>
<p>The mothers spent <a href="https://melbourneinstitute.unimelb.edu.au/hilda/publications/hilda-statistical-reports">53 hours</a> per week. Their male partners spent 30 hours.</p>
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Read more:
<a href="https://theconversation.com/hilda-survey-at-a-glance-7-charts-reveal-were-smoking-less-taking-more-drugs-and-still-binge-drinking-223004">HILDA survey at a glance: 7 charts reveal we're smoking less, taking more drugs and still binge drinking</a>
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<img src="https://counter.theconversation.com/content/222897/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Roger Wilkins receives funding from the Australian Research Council. </span></em></p>The gender wage and employment gaps are narrowing, and working from home is helping drive the change.Roger Wilkins, Professorial Fellow and Deputy Director (Research), HILDA Survey, Melbourne Institute of Applied Economic and Social Research, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2185072023-12-07T02:48:10Z2023-12-07T02:48:10ZSexual orientation and earnings appear to be linked – but patterns differ for NZ men and women<p>New Zealand has made substantial progress on promoting LGBTQ+ rights over the past 20 years, including legalising same-sex civil unions in 2004, <a href="https://www.rnz.co.nz/news/political/133003/parliament-passes-same-sex-marriage-bill">legalising same-sex marriage</a> in 2013, and <a href="https://www.tengakaukahukura.nz/banning-conversion-practices">banning conversion practices</a> in 2022. </p>
<p>One thing missing, however, is a clear view of the employment prospects and experiences of the LGBTQ+ population.</p>
<p><a href="https://docs.iza.org/dp14496.pdf">Most studies</a> from overseas show varying income patterns, with gay men generally earning less than heterosexual men, and lesbian women paid more than heterosexual women. </p>
<p>Our new research provides the <a href="https://www.aut.ac.nz/__data/assets/pdf_file/0008/824930/working-paper-23_05.pdf">first empirical evidence</a> of the relationship between minority sexual orientation and the labour market earnings of New Zealand adults. And it looks like the patterns seen overseas are being replicated locally.</p>
<h2>Identifying LGBTQ+ couples</h2>
<p>One of the biggest challenges for empirical research such as ours is the lack of relevant data on the LGBTQ+ population. Barring a few <a href="https://www.stats.govt.nz/news/one-third-of-people-who-identify-as-lgbt-plus-hold-a-bachelors-degree-or-higher/">nationally representative surveys</a>, there aren’t many sources of economic data that allow identification of individuals belonging to the Rainbow+ community.</p>
<p>To address this information gap, we used various administrative data sets in Stats NZ’s <a href="https://www.stats.govt.nz/integrated-data/integrated-data-infrastructure/">Integrated Data Infrastructure</a>. Specifically, we used data from the 2013 and 2018 Censuses, which included a household roster with detailed information on relationships among individuals. </p>
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Read more:
<a href="https://theconversation.com/we-asked-same-gender-couples-how-they-share-the-mental-load-at-home-the-results-might-surprise-you-208667">We asked same-gender couples how they share the 'mental load' at home. The results might surprise you</a>
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<p>This allowed us to identify households with two adults of the same sex, where the second adult is described as the spouse or de-facto partner of the person completing the forms. We compared this with individuals in different-sex relationships (as opposed to heterosexual, as some partners may identify as bisexual). </p>
<p>Additionally, our analysis focused on full-time working adults aged between 25 and 64, who were unlikely to be pursuing further education during the period of our analysis.</p>
<h2>Earning profile by sexual orientation</h2>
<p>We linked our sample to the Inland Revenue’s individual tax records, which have detailed information on labour market earnings. </p>
<p>Individuals in same-sex couples appeared to be younger, more likely to have a bachelor’s degree, more likely to live in the urban areas of Auckland or Wellington, and less likely to be married than individuals in different-sex couples. We accounted for these differences in our main analysis.</p>
<p>We found that women in same-sex couples earn 6-7% more than similarly situated women in different-sex couples. For men, the opposite pattern emerged. Men in same-sex couples earned significantly less than otherwise similar men in different-sex couples by an average difference of 6-7%.</p>
<p>We also looked into different sub-groups, such as the marital status of the couple, the duration of cohabitation, or the location of residence and so on. </p>
<p>Importantly, there was no meaningful change in the earnings differences from 2013 to 2018, despite continued improvement in societal attitudes toward sexual minorities. </p>
<p>We also found the earnings differences were larger for married individuals than for people in de-facto relationships for both men and women in same-sex couples. </p>
<p>The earnings differences were smaller for younger individuals (under 45 years old) for both men and women in same-sex couples, compared to their counterparts in different-sex couples. The earnings deficit for men in same-sex couples was also significantly smaller in major cities like Auckland and Wellington, than in the rest of the country.</p>
<h2>Gaps in the data</h2>
<p>The gaps in available data mean our study has some limitations. Firstly, we do not have direct information about people’s sexual orientation. </p>
<p>Also, we were unable to identify single or non-partnered sexual minorities whose labour market experiences may differ. Hopefully, results from the 2023 Census will provide new insights. For the first time, this year’s census included questions about gender and sexual identity.</p>
<p>Finally, the data used to identify same-sex couples depends on individuals reporting they are in a same-sex romantic relationship, which may be under-reported due to stigma.</p>
<h2>The road ahead</h2>
<p>Empirical research documenting the wellbeing of Aotearoa’s LGBTQ+ population is important from a policy perspective. For example, there is <a href="https://static1.squarespace.com/static/5bdbb75ccef37259122e59aa/t/629e7d2d64349d3b11b08919/1654553906843/Same+and+Multiple+Sex+Attracted_030622.pdf">ample evidence</a> of significant disparities in the mental health and wellbeing of Aotearoa’s Rainbow+ youth. There have been <a href="https://www.stats.govt.nz/news/2023-census-first-to-collect-gender-and-sexual-identity-from-everyone-in-aotearoa-new-zealand/">recent efforts</a> to address the common data-related challenges that will help inform these policies. </p>
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Read more:
<a href="https://theconversation.com/how-parenthood-continues-to-cost-women-more-than-men-97243">How parenthood continues to cost women more than men</a>
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<p>Our study is part of a much wider ongoing international collaboration with the <a href="https://www.vanderbilt.edu/lgbtq-policy-lab/">LGBTQ+ Policy Lab</a> at Vanderbilt University. </p>
<p>The aim is to understand the experiences and life outcomes of individuals belonging to the Rainbow+ community. We hope to develop a knowledge base that taps into the social, economic, physical and mental wellbeing of sexual and gender minorities in Aotearoa New Zealand. </p>
<p>Understanding the experiences of this community will help us build on the progress of the past two decades to create a more inclusive Aotearoa New Zealand.</p><img src="https://counter.theconversation.com/content/218507/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Alexander Plum received funding from the Health Research Council (HRC). </span></em></p><p class="fine-print"><em><span>The views here are the authors' own and do not reflect those of the Federal Reserve Board of Governors, Federal
Reserve System, or Statistics New Zealand.</span></em></p>Why do gay men generally earn less than heterosexual men, and lesbian women more than heterosexual women? New research aims to find out why, and how LGBTQ+ inclusivity can be improved.Alexander Plum, Senior Research Fellow in Applied Labour Economics, Auckland University of TechnologyKabir Dasgupta, Research associate, Auckland University of TechnologyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2171452023-11-10T15:20:07Z2023-11-10T15:20:07ZShareholder activists can inadvertently raise CEO pay – here’s how to help make pay rises more equal for all<figure><img src="https://images.theconversation.com/files/558308/original/file-20231108-23-mh28g3.jpg?ixlib=rb-1.1.0&rect=0%2C14%2C9387%2C6207&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/business-candidate-imbalance-comparison-money-leverage-2036243690">Andrey_Popov/Shutterstock</a></span></figcaption></figure><p>Activist investors or shareholders can be a powerful force in the corporate world, capable of driving significant change within companies. Their influence can be a force for good. It can extend beyond financial decisions to advocate that a company makes important societal, ethical and, increasingly, <a href="https://www.npr.org/2023/04/09/1168446621/businesses-face-more-and-more-pressure-from-investors-to-act-on-climate-change">environmental changes</a>. </p>
<p>Recently, shareholder collaboration initiatives like <a href="https://sayonclimate.org/">Say on Climate</a> have led investors to influence companies’ environmental policies and practices. But investors are also speaking out on social issues such as <a href="https://www.unpri.org/research/why-and-how-investors-can-respond-to-income-inequality/3777.article#Public_policy_760481">income inequality</a>. </p>
<p>As rising CEO compensation contrasts with stagnant employee pay, the resulting CEO-to-worker pay disparities can fuel income inequality and cause employee unrest. In the US, for example, the United Auto Workers (UAW) union recently declared a strike against auto giants such as Ford and Stellantis, demanding a 40% employee pay rise after double-digit jumps in their <a href="https://www.bbc.co.uk/news/business-66847747">CEOs’ pay packets</a>.</p>
<p>Such large pay disparities can have negative consequences including lowering morale and productivity among employees, and eroding CEO accountability to shareholders. They can also affect a company’s reputation, influence customer loyalty and undermine shareholder confidence. This could impair a company’s overall performance and long-term sustainability.</p>
<p>Companies are required to show how much their managers get paid compared to their employees in their financial reports. In the <a href="https://www.sec.gov/news/press-release/2015-160">US</a>, for instance, financial regulator the Securities and Exchange Commission mandates the reporting of the CEO-to-worker pay ratio. In the <a href="https://www.gov.uk/government/news/new-executive-pay-transparency-measures-come-into-force">UK</a>, a similar rule has been introduced by the Department for Business, Energy and Industrial Strategy. </p>
<p>Disclosing the CEO-to-worker pay gap is seen by regulators as a way to reinforce corporate accountability. It gives more information and control to shareholders over the fairness of compensation practices. But it’s <a href="https://hbr.org/2017/02/why-we-need-to-stop-obsessing-over-ceo-pay-ratios">still not fully understood</a> how such disclosures actually affect CEO-to-worker pay disparities.</p>
<h2>How shareholder activism affects CEO pay</h2>
<p>We <a href="https://onlinelibrary.wiley.com/doi/10.1002/ijfe.2866">recently investigated</a> how shareholders affect CEO-to-worker pay ratios and their influence on CEO compensation. We studied companies listed on the <a href="https://www.investopedia.com/terms/r/russell_3000.asp">Russell 3000 Index</a>, which tracks the largest 3,000 US companies by market capitalisation. We wanted to better understand how shareholders might influence pay disparities and also whether regulatory initiatives aimed at reducing them actually work.</p>
<p>As the pay gap between CEOs and workers gets larger, we found that shareholders are more likely to vote against the CEO’s pay package. This suggests that shareholders are paying more attention to CEO pay and are concerned about the negative effects that large pay disparities can have on employees. In theory, this heightened vigilance should deter executive excess.</p>
<p>However, we also found that when shareholders voice their concerns about pay disparities, CEO compensation can increase. Why? The votes of shareholders may prompt remuneration committees that decide what CEOs should get paid to revisit the CEO pay package. </p>
<p>But instead of decreasing CEO compensation, we found that remuneration committees are inclined to change how CEOs are paid to make it more closely linked to performance. This action, in turn, could result in increased CEO compensation in cases where the CEO performs well.</p>
<p>And so, the remuneration committee may use shareholder dissent votes to justify paying CEOs more. But this typically only happens if CEOs meet their performance targets. This delicate balance underscores the complexity of shareholder influence on CEO pay and raises questions about whether the new rules designed to make pay more equal actually work.</p>
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<img alt="Group of people in suits with raised hands, man in suit pointing to himself." src="https://images.theconversation.com/files/558301/original/file-20231108-21-626r1r.jpg?ixlib=rb-1.1.0&rect=0%2C11%2C7940%2C4773&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/558301/original/file-20231108-21-626r1r.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=362&fit=crop&dpr=1 600w, https://images.theconversation.com/files/558301/original/file-20231108-21-626r1r.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=362&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/558301/original/file-20231108-21-626r1r.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=362&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/558301/original/file-20231108-21-626r1r.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=454&fit=crop&dpr=1 754w, https://images.theconversation.com/files/558301/original/file-20231108-21-626r1r.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=454&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/558301/original/file-20231108-21-626r1r.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=454&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Sometimes the pay gap widens after shareholders highlight CEO-to-employee wage disparities.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/audience-raised-their-hands-ask-question-1998393134">Party people studio/Shutterstock</a></span>
</figcaption>
</figure>
<h2>What can be done about excessive CEO pay?</h2>
<p>Of course, governments and politicians have a role to play in reducing the CEO-to-worker pay ratios. They could <a href="https://www.bbc.com/worklife/article/20210610-the-push-to-penalise-big-corporations-with-huge-pay-gaps">impose penalties</a> on corporations with excessively large pay gaps. The city of Portland in Oregon already <a href="https://www.portland.gov/policies/licensing-and-income-taxes/fees/lic-502-pay-ratio-surtax">imposes such a tax</a>. </p>
<p>At a national level, US Senator Bernie Sanders has introduced the <a href="https://www.congress.gov/bill/117th-congress/senate-bill/794/text">Tax Excessive CEO Pay Act of 2021</a>. If passed, it would set higher tax rates for corporations with disproportionate pay ratios. Non-governmental organisations (NGOs) already report pay disparities, but they could also <a href="https://www.theguardian.com/global-development/poverty-matters/2012/mar/13/ngos-need-third-way-collaboration">push harder for change</a> by advocating for reforms and championing transparency.</p>
<p>You can also play a role. If you work, consider joining a union to fight for fairer wages and more transparent compensation practices. Employees can use unions to collectively voice concerns about pay disparity and ensure their interests are <a href="https://aflcio.org/paywatch/company-pay-ratios">adequately represented</a> in compensation discussions. Collective bargaining can exert significant pressure on corporations and help <a href="https://www.ilo.org/infostories/Stories/Labour-Relations/Can-Collective-Bargaining-Create-a-Fairer-Economy#right-to-be-heard/collective-bargaining-inequality">reduce income inequality</a>.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/recent-pay-rises-suggest-that-collective-bargaining-may-be-on-the-way-back-199436">Recent pay rises suggest that collective bargaining may be on the way back</a>
</strong>
</em>
</p>
<hr>
<p>As a consumer, you could also vote with your feet. Use your <a href="https://www.ethicalconsumer.org/ethicalcampaigns/boycotts">purchasing power</a> to support companies with fairer compensation practices and shun those that perpetuate income inequality.</p>
<p>In the ongoing battle against income inequality, enhancing shareholder engagement to reduce CEO-to-worker pay disparities is essential. It is also important to consider the unintended consequences – the effect on employee morale and productivity, for example – that may result in increased CEO compensation. These actions will help shape a more equitable and responsible corporate landscape.</p><img src="https://counter.theconversation.com/content/217145/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Research shows that when shareholders complain about pay gaps between CEOs and their employees widening, it can cause even more disparity.Etienne Develay, Lecturer in Sustainability Accounting and Finance, Nottingham Trent UniversityStephanie Giamporcaro, Associate Professor, ESG and Sustainable Finance, Nottingham Trent UniversityYan Wang, Associate Professor in Accounting and Finance, Nottingham Trent UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2165022023-11-05T09:27:29Z2023-11-05T09:27:29ZSouth Africa’s wage gap is huge: why companies should report what CEOs and workers earn<p>Inequality in South Africa is high, whether measured <a href="https://theconversation.com/south-africa-cant-crack-the-inequality-curse-why-and-what-can-be-done-213132">by income or wealth</a>. One of the results is that there’s acute public scrutiny of executive compensation.</p>
<p>This is understandable given that the skew in rewards for executives compared with wages of workers is one of the key drivers of rising inequality – in South Africa and across the globe.</p>
<p>Drawing on recent publicly available data, we undertook <a href="https://www.wits.ac.za/media/wits-university/faculties-and-schools/commerce-law-and-management/research-entities/scis/documents/companies-act-submission-to-parliament2023.pdf">a preliminary analysis</a> comparing chief executive officer (CEO) pay with average monthly pay ratios in the country. In our analysis CEO pay included a base salary and a variety of benefits. We then compared the CEO’s pay to the overall average monthly earning provided by the country’s statistics agency, StatsSA. </p>
<p><a href="https://www.statssa.gov.za/publications/Report-02-11-02/Report-02-11-022021.pdf">StatsSA estimates</a> show that the average monthly pay for all workers, regardless of their sector of employment, was R23,640 (about US$1,280). We acknowledge this number is a high figure, no doubt driven up by the <a href="https://www.oecd-ilibrary.org/content/paper/5kmms0t7p1ms-en?site=fr">dynamics</a> of South Africa’s labour market – high unemployment levels and high income inequality. The high figure had the effect of lowering the pay ratios, making them look better than they might actually be.</p>
<p>Using a sample of companies across various sectors of the economy our analysis showed that CEOs earn between 150 and 949 times more than the average pay of all South African workers. </p>
<p>Our findings are important because they shed light on inequality within firms – a key component of inequality in society in general.</p>
<p>We submitted our findings to hearings in parliament on two bills <a href="https://www.parliament.gov.za/bill/2314485">tabled earlier this year</a> – the Companies Amendment Bill and the Companies Second Amendment Bill. If passed, the bills would make it compulsory for companies to disclose their pay gap ratios. The aim is to encourage adequate disclosure so that all stakeholders have sufficient data to make informed decisions. </p>
<p>We are in favour of the bills because it will mean that companies can’t go on ignoring inequalities in earnings and wealth in South Africa. Disclosures will also provide other social actors with evidence to question inequalities within firms, and demand changes. </p>
<p>Our analysis differs from previous work. For example, one analysis focused only on pay ratios of companies in <a href="https://open.uct.ac.za/server/api/core/bitstreams/36640f3c-5b95-4a98-875b-35a8d859cfd4/content">consumer products and services</a> and another only on <a href="https://journals.co.za/doi/abs/10.4102/sajhrm.v16i0.983">state-owned entities</a>. There’s also a study that describes <a href="https://repository.up.ac.za/bitstream/handle/2263/27027/dissertation.pdf?sequence=1&isAllowed=y">the relationship between corporate performance and CEO pay</a>.</p>
<p>We saw a divergence between the earnings of CEOs employed at locally owned compared to transnational firms. There was also a difference between CEOs in privately owned companies and those at the helm of state-owned entities. We also found differences in earnings across and within sectors. </p>
<p>And we found there was a weak correlation between the CEO’s pay and their sector’s overall contribution to economic growth and employment share. For example, the remuneration gap in the mining sector is high yet the sector’s contribution to GDP and employment share has declined in the post-1994 period.</p>
<h2>Changes to the law</h2>
<p>The purpose of the bills tabled by trade and industry minister Ebrahim Patel is to improve the ease of doing business, clarify uncertainty and reduce bureaucratic red tape. </p>
<p>The changes also include clauses that would make remuneration disclosures mandatory for public companies and state-owned entities. </p>
<p>If the bills are passed, companies will be required to list the remuneration and total benefits received by the highest earning individual and the lowest earning employee. </p>
<p>Additionally, companies will be required to calculate a remuneration gap, defined as the ratio between the total remuneration of the top 5% highest paid individuals and that of the lowest paid 5%. This must be calculated at both the median and mean to avoid any distortion by outliers. </p>
<h2>What’s missing</h2>
<p>Based on our findings and the research we’re involved in, we argue that the bills don’t go far enough. There are gaps that need to be plugged for them to be truly effective.</p>
<p>The law should require firms to report the wages of the lowest paid person regardless of whether they are employed internally or outsourced. This isn’t the case at the moment.</p>
<p>This is important because employment growth in South Africa over the past 30 years has largely been in <a href="https://wiredspace.wits.ac.za/server/api/core/bitstreams/13cfa66a-b328-4ac8-91ce-f828db83fa6a/content">temporary employment services</a>.</p>
<p>Pay disclosures in the US allow for both categories of workers by recommending that firms with more than 100 employees hired through a labour contractor should file two separate reports, one for individuals paid via the firm’s payroll and a separate one to include outsourced workers. South Africa should adopt a similar threshold.</p>
<p>Secondly, the current version of the amendment is a missed opportunity to legislate reporting on <a href="https://www.nbi.org.za/wp-content/uploads/2021/05/NBI-GPG-Long-Paper-Outline_March-2021-FINAL1.pdf">gender pay gaps</a> at the firm level. This is already in place in Germany, the UK, Australia and New Zealand.</p>
<p>Despite <a href="https://www.researchgate.net/publication/346397261_Gender_and_Work_in_South_Africa">an increase in female participation rates</a> in the labour markets, female workers continue to face discrimination. <a href="https://www.statssa.gov.za/?p=12930#:%7E:text=Female%20workers%20earn%20approximately%2030,the%20South%20African%20labour%20market">Female workers earn</a> R70 on average for every R100 earned by male workers. These pay disparities along gender lines persist even when we account for worker characteristics by including age, educational attainment levels, experience, sector or industry and occupational characteristics. </p>
<p>We recommend the inclusion of payment disclosures along gender lines. </p>
<p>Thirdly, it is important to include the base pay made to the highest and lowest earning individual together with any short- and long-term benefits. This is because in some industries the base pay is low relative to the total package earned by executives. </p>
<p>While it is important to include both base pay and other short- and long-term benefits, we believe that the listed payments are not exhaustive. We propose the inclusion of the following:</p>
<ul>
<li><p>any tax-deductible expenses paid by the company on behalf of the highest and lowest paid individuals</p></li>
<li><p>compensation for loss of office paid to or received by any individual together with any other payments relating to termination of services.</p></li>
</ul>
<p>The proposed amendments do not specifically state whether in addition an individual remuneration gap will be calculated between the highest and lowest earning individuals. We recommend that this calculation is specifically included.</p><img src="https://counter.theconversation.com/content/216502/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Imraan Valodia and the Southern Centre for Inequality Studies receive funding from a number of local and international foundations that support academic research.
</span></em></p><p class="fine-print"><em><span>Arabo K. Ewinyu and the Southern Centre for Inequality Studies receive funding from a number of local and international foundations that support academic research.</span></em></p>Changes in the law will ensure that companies can’t go on ignoring inequalities in earnings and wealth in South Africa.Imraan Valodia, Pro Vice-Chancellor: Climate, Sustainability and Inequality and Director: Southern Centre for Inequality Studies., University of the WitwatersrandArabo K. Ewinyu, Researcher, Southern Centre for Inequality Studies, University of the WitwatersrandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2145472023-10-05T11:11:29Z2023-10-05T11:11:29ZOntario’s 2-tier minimum wage: As discriminatory now as it was in the 1990s<iframe style="width: 100%; height: 100px; border: none; position: relative; z-index: 1;" allowtransparency="" allow="clipboard-read; clipboard-write" src="https://narrations.ad-auris.com/widget/the-conversation-canada/ontarios-2-tier-minimum-wage-as-discriminatory-now-as-it-was-in-the-1990s" width="100%" height="400"></iframe>
<p>The province of Ontario <a href="https://news.ontario.ca/en/release/1002886/ontario-increasing-minimum-wage-to-1655-an-hour">has increased</a> its minimum wage to $16.55 per hour — unless workers are students under the age of 18, in which case their labour is only worth $15.60.</p>
<p>Québec and Manitoba eliminated their two-tier minimum wage in the late 1980s over concerns that the wage differential amounted to age discrimination and therefore violated Canada’s <a href="https://www.justice.gc.ca/eng/csj-sjc/rfc-dlc/ccrf-ccdl/">Charter of Rights and Freedoms</a>. Ontario almost did as well 30 years ago. But the Ontario NDP government broke its promise, as I detail below.</p>
<p>The issue is personal for me. When I was 17 years old, I was hired by my hometown library. But a week into the job I was called into the head librarian’s office and told that they had made an administrative error. They would need to pay me the lower rate. </p>
<p>With that, my wages dropped from $4 an hour to $3.15. Over the next year, I worked for substantially less than other students hired at the same time and who were doing the same work. This is an experience not easily forgotten.</p>
<h2>Age discrimination</h2>
<p>A few years later, I did something about it. As the head of a provincial student group, <a href="https://ondy.ontariondp.ca/">Ontario New Democratic Youth</a>, I launched a campaign on the issue in late 1989. As I wrote at the time: </p>
<blockquote>
<p>“If the two-tiered system was based upon any other category (of difference), it would not be tolerated.” </p>
</blockquote>
<p>We made the case that it was “unfair to value one person’s labour less than another’s simply on the basis of age.”</p>
<p>We then launched a Charter of Rights and Freedoms challenge on the issue of age discrimination with the help of Toronto labour lawyer <a href="https://goldblattpartners.com/our-lawyers/steven-barrett/">Steven Barrett</a>. A notice of application was submitted to the Supreme Court of Ontario in April 1990.</p>
<p>But then, most unexpectedly, the Ontario NDP won the election in September 1990 and <a href="https://www.tvo.org/article/orange-shockwave-how-ontario-got-its-first-ever-ndp-government">Bob Rae</a> became premier.</p>
<p>It seemed strange to us to continue the court challenge as our youth group was the party’s youth wing. Besides, the Ontario NDP had promised to eliminate the two-tier minimum wage in its election platform. It was also mentioned in <a href="https://www.poltext.org/sites/poltext.org/files/discoursV2/Ontario/ON_DT_1990_35_01.txt">the government’s first speech from the throne</a>. So, we dropped the lawsuit. </p>
<figure class="align-left ">
<img alt="Court documents." src="https://images.theconversation.com/files/552305/original/file-20231005-28-q6twsi.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/552305/original/file-20231005-28-q6twsi.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/552305/original/file-20231005-28-q6twsi.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/552305/original/file-20231005-28-q6twsi.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/552305/original/file-20231005-28-q6twsi.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/552305/original/file-20231005-28-q6twsi.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/552305/original/file-20231005-28-q6twsi.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">A photo of the paperwork pertaining to the lawsuit the author’s youth group launched and then dropped.</span>
<span class="attribution"><span class="source">(Steven High)</span></span>
</figcaption>
</figure>
<p>The Ontario government reduced the student differential in 1991 to 45 cents an hour from 85 cents an hour, promising to eliminate it altogether the following year.</p>
<p><a href="https://www.thespec.com/news/hamilton-region/ndp-politician-bob-mackenzie-dead/article_8a4536d2-8d22-5e9b-92bb-7d90e9c320ee.html">Bob Mackenzie</a>, the NDP’s labour minister, even told the media at the time that the under-18 minimum wage “just cannot work in a society that promises equality and fairness. In fact, the existence of the student differential is currently before the courts in a challenge under the Charter of Rights and Freedoms.” </p>
<p>But then something changed, and the NDP decided to maintain the lower differential.</p>
<p>I have long wondered what happened. </p>
<h2>Employer lobbying</h2>
<p>Thirty years later, I am writing a book on how the NDP government responded to the industrial crisis. So, I decided to do some digging in the archives to find out why. </p>
<p>Thanks to <a href="https://www.ola.org/en/members/all/richard-alexander-allen">Richard Allen</a>, an NDP cabinet minister and historian who donated his records to McMaster University, I discovered that the Ontario Restaurant Association and other employer groups lobbied hard to convince the NDP cabinet to reverse itself.</p>
<p>According to archival material, they argued:</p>
<blockquote>
<p>“The student minimum wage category should not be seen as discriminatory against young inexperienced workers, instead it should be viewed as an affirmative action initiative which assists young inexperienced workers in gaining employment.” </p>
</blockquote>
<p>These were tough economic times and the youth unemployment rate was a dismal <a href="https://www.macdonaldlaurier.ca/files/pdf/MLI-PCrossYouthUnemployment10-15-webready.pdf">18 per cent</a>.</p>
<figure class="align-left ">
<img alt="A newsletter on newsprint with the headline Youth Viewpoints." src="https://images.theconversation.com/files/552307/original/file-20231005-15-gui2v6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/552307/original/file-20231005-15-gui2v6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=800&fit=crop&dpr=1 600w, https://images.theconversation.com/files/552307/original/file-20231005-15-gui2v6.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=800&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/552307/original/file-20231005-15-gui2v6.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=800&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/552307/original/file-20231005-15-gui2v6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1005&fit=crop&dpr=1 754w, https://images.theconversation.com/files/552307/original/file-20231005-15-gui2v6.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1005&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/552307/original/file-20231005-15-gui2v6.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1005&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">An Ontario New Democrat newsletter on the minimum wage differential for students.</span>
<span class="attribution"><span class="source">(Steven High)</span></span>
</figcaption>
</figure>
<p>To find out more, I filed an access-to-information request and discovered that a decision was made in September 1991, the same month the <a href="https://springmag.ca/rae-days-lessons-from-the-social-contract-30-years-later">NDP abandoned its longstanding promise to deliver public auto insurance</a>, to hold off on eliminating the youth differential. </p>
<p>Instead, the Student Minimum Wage Consultation Group was formed with representatives of the four main employer groups in the hospitality industry, all with a strong vested interest in maintaining the youth differential, as well as two service-sector unions and an obscure student group nobody ever heard of. </p>
<p>The consultation group recommended keeping the differential.</p>
<h2>Discriminatory differential</h2>
<p>In its April 1993 cabinet submission on the subject, the Ministry of Labour conceded that the differential was discriminatory but recommended it was maintained anyway.</p>
<p>Here is how they worded it: </p>
<blockquote>
<p>“Clearly, the student minimum wage does discriminate on the basis of age and student status. The student component does not appear to present any legal difficulties, but the age discrimination is a complex legal issue.” </p>
</blockquote>
<p>It went on to say that “legal analysis concluded that if a Charter challenge were to be raised again there is a risk that the student differential could be found to violate the Canadian Charter of Rights and Freedoms on the basis of age discrimination.” </p>
<p>Thanks to us dropping our case, the ministry could advise: “There is no legal ruling directly on this issue and no current challenge.” The NDP cabinet therefore agreed with the warped line of reasoning that paying less to younger workers was a form of affirmative action. </p>
<p>Thirty years later, young people in Ontario are still paying the price: 95 cents an hour, to be precise.</p><img src="https://counter.theconversation.com/content/214547/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Steven High receives funding from the Social Sciences and Humanities Research Council. Thirty years ago, he was a member of the New Democratic Party.</span></em></p>Ontario almost joined Manitoba and Québec in eliminating the under-18 minimum wage 30 years ago. Then Bob Rae reneged on an election promise.Steven High, Professor of History, Centre for Oral History and Digital Storytelling (COHDS), Concordia UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2134372023-09-21T12:45:25Z2023-09-21T12:45:25ZReality TV show contestants are more like unpaid interns than Hollywood stars<figure><img src="https://images.theconversation.com/files/548929/original/file-20230918-29-jud5nf.jpg?ixlib=rb-1.1.0&rect=10%2C0%2C3584%2C2619&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Country singer Adley Stump, a former contestant on NBC's hit reality show 'The Voice,' performs at an Air Force base in Washington state.</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/jblmpao/19564078650">Joint Base Lewis McChord/flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-sa/4.0/">CC BY-NC-SA</a></span></figcaption></figure><p>In December 2018, John Legend <a href="https://twitter.com/johnlegend/status/1070158841499840512?s=20">joined then-newly elected U.S. Rep. Alexandria Ocasio-Cortez</a> to criticize the exploitation of congressional interns on Capitol Hill, most of whom worked for no pay.</p>
<p>Legend’s timing was ironic. </p>
<p>NBC’s “The Voice” had just announced that Legend would join as a judge. He would go on to <a href="https://talentrecap.com/the-voice-coaches-salary-how-much-do-nick-jonas-kelly-clarkson-john-legend-and-blake-shelton-make/">reportedly earn US$14 million</a> per season by his third year on the show. Meanwhile, all of the participants on “The Voice,” save for the winner, earned $0 for their time, apart from a housing and food stipend – much like those congressional interns.</p>
<p>The fall 2023 TV lineup will be saturated with low-cost reality TV shows like “The Voice”; for networks, it’s <a href="https://www.wsj.com/business/media/how-prime-time-tv-will-look-different-this-fall-63ff818c">an end-around</a> to the ongoing <a href="https://www.nbcnews.com/pop-culture/pop-culture-news/negotiations-set-resume-striking-writers-hollywood-studios-rcna105230">TV writers</a> <a href="https://deadline.com/2023/09/actors-strike-picket-line-netflix-paramount-1235545964/">and actors</a> strikes. </p>
<p>Whether it’s “The Voice,” “House Hunters,” “American Chopper” or “The Bachelorette,” reality shows thrive thanks to a simple business model: They pay millions of dollars for big-name celebrities to serve as judges, coaches and hosts, while participants work for free or for paltry pay under the guise of chasing their dreams or gaining exposure. </p>
<p>These participants are the unpaid interns of the entertainment industry, even though it’s their stories, personalities and talent that draw the viewers. </p>
<h2>Dreams clash with reality</h2>
<p>To conduct research for my book, “<a href="https://www.palgrave.com/us/book/9783030445867">Getting Signed: Record Contracts, Musicians, and Power in Society</a>,” I interviewed musicians around the country. </p>
<p>The book was about the exploitative nature <a href="https://www.vice.com/en/article/y3gmjw/bad-deals-are-baked-into-the-way-the-music-industry-operates">of record contracts</a>. But during my research, I kept running into singers who had either auditioned for or participated in “The Voice.” </p>
<p>On “The Voice,” singers compete on teams headed by a celebrity coach. Following a blind audition and various elimination rounds, the <a href="https://www.mlive.com/entertainment/muskegon/2012/10/how_does_the_voice_work_your_c.html">live broadcasts</a> begin with four teams of five members apiece. These 20 contestants spend months working in Los Angeles and are <a href="https://www.newsweek.com/voice-mentors-contestants-money-1370215">provided with only their room and board</a>. Each week, at least one player is eliminated. At the end of each season, the winner receives $100,000 and a record contract. </p>
<p>While some viewers might see reality shows like “The Voice” as launching pads for music careers, many of the musicians I spoke with were disheartened by their experiences on the show.</p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/EGkmybURE5c?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">Contestants audition for ‘The Voice’ ahead of its 24th season.</span></figcaption>
</figure>
<p>Unlike “American Idol,” where a number of winners, from Kelly Clarkson to Jordan Sparks, have made it big, no winners of “The Voice” have become stars. The closest person to “making it” from “The Voice” <a href="https://www.npr.org/sections/coronavirus-live-updates/2020/10/08/921574715/snl-nixes-morgan-wallen-appearance-after-singer-violates-covid-19-safety-protoco">is the controversial</a> country singer Morgan Wallen, who was infamously dropped by his <a href="https://www.nbcnews.com/news/us-news/country-star-morgan-wallen-caught-video-using-n-word-label-n1256630">label and country radio</a> following the emergence of a video of him using a racial slur. And Wallen didn’t even win “The Voice”; in fact, he <a href="https://thevoice.fandom.com/wiki/Morgan_Wallen">barely made it past</a> the blind audition.</p>
<p>Former contestants repeatedly told me that the television exposure did little to help their careers. </p>
<p>Prior to joining the show, many of the musicians were trying to scratch out a living through touring or performing. They put their developing careers on pause to chase their dreams. </p>
<p>However, <a href="https://doi.org/10.1080/15405702.2020.1733577">the show’s contracts have stipulated</a> that contestants cannot perform, sell their name, image and likeness, or record new music while on “The Voice.” (The Conversation reached out to NBC to see if this remains the case for the current season, but did not receive a comment.) </p>
<p>This leaves the 20 finalists with no means to sell their music, even as they spend up to eight months competing. When the show’s losers return to performing, many of them have little new material to promote. By the time they drop a new single or album and announce a tour, some of them told me that they had lost a good portion of their following. </p>
<p>There is one group of people who receive meaningful exposure from these shows: the coaches and judges. Several singers, such as Gwen Stefani and Pharell Williams, have used “The Voice” to jolt their stagnating music careers. While earning millions as coaches and judges, these stars even use the show to <a href="https://screenrant.com/the-voice-coaches-popstars-successful-music-careers-boost/">promote their music</a> – something the contestants themselves are barred from doing.</p>
<p>Paying these contestants is feasible. If Legend earned $13 million instead of $14 million, that spare million dollars could be dispersed to half of the contestants at $100,000 apiece – an amount that’s currently only reserved for the winner of the show. Cut the salaries of all four coaches by $1 million apiece, and it would free up enough money to pay all 20 contestants $200,000 each. </p>
<h2>A gold mine for networks</h2>
<p>“The Voice” is far from the only reality show to take advantage of the genre’s low overhead costs.</p>
<p>Over the past two decades, shows featuring Americans looking to buy houses or remodel their homes <a href="https://www.architecturaldigest.com/story/how-hgtv-became-industry-juggernaut">have exploded in popularity</a>. HGTV cornered this market by creating popular shows such as “<a href="https://www.imdb.com/title/tt0369117/">House Hunters</a>,” “<a href="https://www.hgtv.com/shows/flip-or-flop">Flip or Flop</a>” and “<a href="https://www.imdb.com/title/tt1827882/?ref_=nv_sr_srsg_0_tt_8_nm_0_q_property%2520brothers">Property Brothers</a>.” </p>
<p>Viewers might not realize just how profitable these shows are.</p>
<p>Take “House Hunters.” The show follows a prospective homebuyer as they tour three homes. Homebuyers featured on the show have noted that <a href="https://slate.com/human-interest/2019/06/house-hunters-true-story-of-being-on-the-show.html">they earn only</a> <a href="https://www.thelist.com/391705/heres-how-much-people-get-paid-to-be-on-house-hunters/">$500 for their work</a>, and <a href="https://www.mentalfloss.com/article/543696/how-much-do-you-get-paid-for-being-on-house-hunters">the episodes take</a> three to five days and about 30 hours to film. The show’s producers <a href="https://www.cheatsheet.com/entertainment/house-hunters-do-the-realtors-on-the-show-get-paid.html/">don’t pay the realtors</a> to be on it.</p>
<p>The low pay for people on reality TV shows matches the low budget for these shows. A former participant wrote that episodes of “House Hunters” <a href="https://utahvalley360.com/2015/04/01/10-things-learned-filmed-hgtvs-house-hunters/">cost around $50,000</a> to film. Prime-time sitcoms, by comparison, have a $1.5 million to $3 million <a href="https://variety.com/2017/tv/news/tv-series-budgets-costs-rising-peak-tv-1202570158/">per episode budget</a>.</p>
<h2>Sidestepping the unions</h2>
<p>That massive budget gap between reality TV and sitcoms is not simply due to an absence of star actors. </p>
<p>Many scripted television shows are based in Los Angeles, where camera crews, stunt doubles, <a href="https://www.motionpicturecostumers.org/">costume artisans</a>, <a href="https://local706.org/about/">makeup artists and hair stylists</a> are unionized. But shows like “House Hunters,” which are filmed across the country, <a href="https://cmii.gsu.edu/files/2017/09/Beck-USG-FINAL-Film-Report-2014.pdf">will recruit crews from right-to-work states</a>. These are states where employees cannot be compelled to join a union or pay union dues as a condition of employment. For these reasons, unions have far less power in these states than they do in places traditionally associated with film and entertainment, such as California and New York. </p>
<p>That’s one reason why <a href="https://www.stage32.com/blog/acting-in-atlanta-everything-you-need-to-know-2319">TV production</a> started moving to <a href="https://www.npr.org/2023/07/20/1189065338/non-union-film-workers-trying-to-break-into-the-atlanta-scene-are-hit-hard-by-st">Atlanta</a> – what’s been dubbed the “<a href="https://time.com/longform/hollywood-in-georgia/">Hollywood of the South</a>” – where shows like “The Walking Dead” and “Stranger Things” have been filmed.</p>
<p>But in my research, I also learned that Knoxville, Tennessee, has become a reality TV mecca. Like Georgia, Tennessee is also a right-to-work state. In Knoxville, many working musicians join the city’s <a href="https://www.doi.org/10.1108/9781839827686">low-paying entertainment apparatus</a> by taking gigs working on TV and film production crews in between shows and tours.</p>
<p>At a time when TV writers and actors are on strike, it is important to understand that the entertainment industry will try to exploit labor for profit whenever it can. </p>
<p>Reality TV is a way to <a href="https://www.reuters.com/lifestyle/reruns-reality-fill-out-strike-struck-fall-tv-season-2023-09-07/">undercut the leverage of striking workers</a>, whether it’s through their lack of unionized actors, or their use of nonunionized production crews.</p>
<figure class="align-center ">
<img alt="A group of striking workers yell, hold signs and thrust their arms skyward." src="https://images.theconversation.com/files/548927/original/file-20230918-17-6dymb1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/548927/original/file-20230918-17-6dymb1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/548927/original/file-20230918-17-6dymb1.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/548927/original/file-20230918-17-6dymb1.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/548927/original/file-20230918-17-6dymb1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/548927/original/file-20230918-17-6dymb1.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/548927/original/file-20230918-17-6dymb1.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">With actors and writers on strike, many networks and streaming services are featuring reality TV-heavy fall lineups.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/members-of-the-hollywood-actors-sag-aftra-union-walk-a-news-photo/1532794702?adppopup=true">David McNew/Getty Image</a></span>
</figcaption>
</figure>
<p>Contestants, casts and crew members are starting to catch on. Many reality TV participants have said that they <a href="https://www.washingtonpost.com/lifestyle/2023/08/12/scabs-actors-writers-strike-breakers/">feel like strike scabs</a>, and Bethenny Frankel of “Real Housewives” <a href="https://www.theguardian.com/tv-and-radio/2023/aug/18/we-wont-take-this-any-more-reality-tv-stars-battle-to-unionise">is reportedly trying to organize</a> her fellow reality performers.</p>
<p>Preying off contestants who are desperate for exposure, reality TV might just be the next labor battle in the entertainment industry. </p>
<p>As <a href="https://twitter.com/johnlegend/status/1070158841499840512?s=20">John Legend</a> put it, “Unpaid internships make it so only kids with means and privilege get the valuable experience.” </p>
<p>Reality TV does the same to aspiring actors, musicians and celebrities.</p><img src="https://counter.theconversation.com/content/213437/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>David Arditi does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>With the TV writers and actors strikes leaving networks with little scripted content, the fall 2023 lineup will be saturated with low-cost reality TV shows like ‘The Voice.’David Arditi, Associate Professor of Sociology, University of Texas at ArlingtonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2126782023-09-01T15:41:04Z2023-09-01T15:41:04ZJobs are up, wages less so – and lower purchasing power could still lead the US into a recession<figure><img src="https://images.theconversation.com/files/545977/original/file-20230901-25275-sig91v.jpg?ixlib=rb-1.1.0&rect=17%2C0%2C5631%2C3771&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Economists are feeling dismal for a reason.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/photo/man-with-empty-wallet-royalty-free-image/80992590">IS/Getty Images</a></span></figcaption></figure><p>Don’t be overly fooled by seemingly rosy jobs data heading into the Labor Day weekend.</p>
<p>Yes, the <a href="https://www.bls.gov/news.release/empsit.nr0.htm">U.S. economy added 187,000 jobs in August 2023</a> – faster than the revised 157,000 increase for July and above most <a href="https://www.morningstar.com/markets/august-jobs-report-forecasts-predict-strong-cooling-growth">analysts’ expectations for the month</a>. And yes, gains were seen across most industries, with health care and social assistance adding 97,300 positions, leisure and hospitality boosting numbers by 40,000, construction up by 22,000 jobs, and 16,000 additional general manufacturing jobs.</p>
<p>But there was also enough in the <a href="https://www.bls.gov/news.release/empsit.nr0.htm">data released by Bureau of Labor Statistics</a> on Sept. 1 to give comfort – of sorts – to the “<a href="https://www.merriam-webster.com/dictionary/Jeremiah#:%7E:text=%3A%20person%20who%20is%20pessimistic%20about%20the%20present%20and%20foresees%20a%20calamitous%20future">Jeremiahs</a>” among us economists. I’ll explain.</p>
<p>While jobs were up, so too was the unemployment rate, which ticked up a modest 0.3% from July to 3.8%. And average hourly earnings <a href="https://fred.stlouisfed.org/series/CES0500000003">increased by just 0.2% in the month to US$33.82</a> – working out to a rather paltry 8 cent increase.</p>
<p>To me, rather than indicating that the job market is <a href="https://www.npr.org/2023/09/01/1197022768/jobs-labor-day-economy-inflation#:%7E:text=The%20jobs%20market%20is%20holding,that%20added%20the%20most%20jobs.">moving along at a healthy clip</a>, as some suggest, it shows signs of something else: a continuing slowdown.</p>
<h2>Look at the long-term trend</h2>
<p>The fact that, overall, jobs expanded a bit faster than expected doesn’t suggest that the economy is ramping up and inflation is going to spike again soon. Rather, it mostly speaks to the difficulty in predicting month-to-month movements. There’s good reason, perhaps, that economics is sometimes <a href="https://www.investopedia.com/terms/d/dismalscience.asp">called “the dismal science</a>” – we aren’t always that good at saying with certainty what will happen over the short term.</p>
<p>Monthly data has its place in making assessments and guiding policy, for sure. But focusing on just one month can be misleading as the data can be quite volatile. </p>
<p>The underlying trends are what matter more. And that is where I see signs of a slowdown.</p>
<p>In 2022, labor demand – as measured by job openings plus nonfarm employment – exceeded labor supply, as measured by the labor force. In other words, there were <a href="https://www.stlouisfed.org/publications/regional-economist/2023/apr/state-level-us-labor-market-supply-demand">more job openings than people willing to fill</a> the positions.</p>
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<p>As a result, we saw labor earnings increase by 5.1% relative to 2021. Great news for employees, but less so for the Federal Reserve: Higher wages combined with supply chain disruptions and the effect of war in Ukraine meant that the inflation rate, as measured by consumer price index growth, rose 7.7% in 2022.</p>
<p>To tame inflation, the Fed embarked on a program of aggressive interest-rate hikes. This resulted in a general economic slowdown by the beginning of 2023. The housing market cooled. Construction and related markets slowed.</p>
<p>But now labor supply is outpacing labor demand – there are more people looking for jobs than there are openings.</p>
<p>Based on the first seven months of data in 2023, <a href="https://www.bls.gov/news.release/pdf/realer.pdf">wage growth</a> has slowed to 3.4% compared to 2022, as has general inflation, slowing to 3.5%.</p>
<p>So where is the economy heading? The preponderance of the data <a href="https://www.reuters.com/markets/us/us-leading-indicators-point-recession-starting-soon-2023-07-20">is pointing to a general economic slowdown</a>. As a result, some suggest the U.S. economy may be <a href="https://abcnews.go.com/Business/soft-landing-means-chances-happen/story?id=94086706#:%7E:text=But%20the%20central%20bank%20hopes%20it%20can%20cool,landing%20at%20an%20event%20at%20the%20Brookings%20Institution">heading for a “soft landing</a>,” where inflation rates reach 2% to 2.5% as the U.S. avoids recession.</p>
<p>But when it comes to the chances of recession, the economy is not quite out of the woods yet. True, inflation is trending down. But earnings have generally grown slower than inflation, resulting in a <a href="https://www.nytimes.com/2023/08/25/business/consumer-retail-shopping.html">loss of purchasing power</a> for consumers.</p>
<p>Less cash to spend on goods doesn’t appear to have hit the economy yet. <a href="https://www.bea.gov/data/consumer-spending/main">Consumer spending</a> in the first seven months of 2023 was up 1.9% on the previous year, by my calculations. However, there is evidence that a lot of this was due to consumers purchasing on credit. Credit card debt reached <a href="https://theweek.com/economy/1026198/american-consumers-credit-crisis">a staggering $1.3 trillion</a> in the second quarter of 2023.</p>
<p>This is not sustainable. At some point soon, consumer spending will have to slow.
And given that consumer spending represents <a href="https://www.mprnews.org/story/2008/10/30/consumer-spending-accounts-for-two-thirds-of-us-economy">about two-thirds of total GDP</a>, a recession could still occur. </p>
<p>My best guess at the moment is that a recession is most likely to occur in early 2024, after the usual spending spree that is the holidays. But fortunately, thanks to the Fed’s recent efforts to decelerate the economy gradually, a major contraction is unlikely.</p><img src="https://counter.theconversation.com/content/212678/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Christopher Decker does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The latest labor figures are less encouraging than they might seem.Christopher Decker, Professor of Economics, University of Nebraska OmahaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2120882023-08-25T13:31:50Z2023-08-25T13:31:50ZWhy CEOs and footballers attract different levels of outrage about high pay<figure><img src="https://images.theconversation.com/files/544743/original/file-20230825-25-84xz4b.jpg?ixlib=rb-1.1.0&rect=38%2C86%2C6361%2C4179&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/multiethnic-youth-protesting-decent-work-life-2331480595">Lomb/Shutterstock</a></span></figcaption></figure><p>The average pay of FTSE100 CEOs rose by 16% from £3.38 million in 2021 to £3.91 million in 2022, according to the latest figures from thinktank the <a href="https://highpaycentre.org/ftse-100-ceos-get-half-a-million-pound-pay-rise/">High Pay Centre</a>. In the same week this was reported, UK political figure Nigel Farage called outgoing NatWest boss Alison Rose’s £2.4 million payout “<a href="https://www.theguardian.com/business/live/2023/aug/23/uk-minister-kemi-badenoch-india-trade-talks-intensify-pmi-pwc-markets-sterling-pound-economy-ftse-business-brexit-live?page=with:block-64e5f55f8f08319ad416c2ce#block-64e5f55f8f08319ad416c2ce">a sick joke</a>”. She recently resigned for leaking private financial information about him to the BBC. </p>
<p>On the other hand, senior NHS doctors are embarking on <a href="https://www.bma.org.uk/news-and-opinion/consultants-launch-second-round-of-strikes">a second round of strikes</a> in response to recent pay erosion and <a href="https://healthmedia.blog.gov.uk/2023/07/14/government-accepts-recommendations-from-nhs-pay-review-bodies/">a “final” pay offer of 6%</a> from the government. In the last two months, teachers have agreed to <a href="https://neu.org.uk/campaigns/pay-campaign/teachers-pay-update/how-offer-funded">settle for 6.5%</a>. <a href="https://news.stv.tv/scotland/train-drivers-with-aslef-union-reject-scotrail-pay-deal-amid-soaring-food-fuel-and-energy-costs">Train drivers</a>, <a href="https://www.rcn.org.uk/news-and-events/news/uk-nhs-pay-rise-2022-23-announced-below-inflation-insult-to-nursing-190722">nurses</a> and <a href="https://www.bbc.co.uk/news/education-59415694">university lecturers</a> are also among a growing list of employees for whom proposed pay increases are failing to beat inflation.</p>
<p>It’s difficult to reconcile these contrasting rates of pay progression, which just seem morally wrong to many people. But understanding some of the nuances surrounding CEO pay can help draw conclusions about what is and is not appropriate when it comes to pay – even if only to calibrate outrage levels. </p>
<p>CEO rewards are set within a global rather than a local market. As with sports stars, it’s necessary to pay at or above the global market rate to attract talent. Other countries, most notably <a href="https://academic.oup.com/rfs/article/24/2/402/1581556">the US</a>, tend to pay CEOs more than the UK, which drives up international norms. These international market forces do not operate in many other areas of the UK labour market, although they’re reportedly making it <a href="https://www.itv.com/news/anglia/2023-07-13/uk-is-effectively-training-doctors-for-australia-and-canada-union-warns">increasingly difficult</a> for the NHS to retain doctors and nurses.</p>
<p>Boards often seek independent advice on CEO pay from “<a href="https://www.icaew.com/-/media/corporate/files/technical/research-and-academics/executive-remuneration-factors-influencing-consultants-advice.ashx#:%7E:text=',-Page%205&text=There%20is%20no%20legal%20requirement,experts%20in%20this%20complex%20area.">compensation consultants</a>”, but these consultants typically recommend paying above average <a href="https://journals.sagepub.com/doi/10.1177/0148558X1002500407">to attract the best candidate</a>.</p>
<figure class="align-right ">
<img alt="Man in cap with white sign printed with ceo pay: the 1% and worker's pay: the 99%." src="https://images.theconversation.com/files/544744/original/file-20230825-26-4v4rcf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/544744/original/file-20230825-26-4v4rcf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=840&fit=crop&dpr=1 600w, https://images.theconversation.com/files/544744/original/file-20230825-26-4v4rcf.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=840&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/544744/original/file-20230825-26-4v4rcf.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=840&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/544744/original/file-20230825-26-4v4rcf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1056&fit=crop&dpr=1 754w, https://images.theconversation.com/files/544744/original/file-20230825-26-4v4rcf.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1056&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/544744/original/file-20230825-26-4v4rcf.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1056&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">A protester holds a sign that compares workers pay to CEO pay during the march to Union Square from Bryant Park at Occupy Wall St ‘May Day’ protests on May 1, 2012 in New York.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/new-york-may-1-protester-holds-101575360">Glynnis Jones/Shutterstock</a></span>
</figcaption>
</figure>
<p>Another particularly important consideration is that a large fraction (often over 70% according to the <a href="https://highpaycentre.org/wp-content/uploads/2023/08/Copy-of-CEO-pay-report-2023-1-1.pdf">High Pay Centre</a>) of a CEO’s total annual pay is variable. For example, bonuses and long-term incentives linked to company performance measures such as share price. This means that CEOs, at least in principle, bear significant compensation risk.</p>
<p>Economic theory argues this risk-bearing should be rewarded, which means <a href="https://academic.oup.com/rfs/article/24/2/402/1581556">expected pay levels</a> rise as compensation risk increases. This is the price we pay for insisting that CEO pay is pegged to performance. This insight also tilts the debate away from a simple discussion of pay levels to a more meaningful conversation about the appropriate strength of the link between pay and performance. </p>
<h2>CEO pay versus performance</h2>
<p>It may seem easier to accept generous pay growth in line with exceptional company performance that benefits a wider stakeholder group including shareholders, other employees, and the broader economy. But much of the unease surrounding CEO pay reflects a structural asymmetry – executives can benefit from positive performance while apparently being <a href="https://onlinelibrary.wiley.com/doi/full/10.1111/corg.12311">insulated when performance is weak</a>. This leads to claims of <a href="https://money.cnn.com/2016/04/21/investing/executive-pay-reward-for-failure/">rewards for failure</a>. Just how much (downside) compensation risk CEOs bear can vary across individuals, companies and industries. </p>
<p>But even when high pay reflects exceptional company performance, inequality persists. The average FTSE100 CEO currently earns 118 times the median UK employee according to the High Pay Centre (remarkably, this ratio has fallen compared with pre-pandemic levels). For example, the ratio stood at 149:1 in 2016 according to <a href="https://www.cipd.org/globalassets/media/knowledge/the-people-profession/latest-updates/7571-ceo-pay-in-the-ftse100-report-web_tcm18-26441.pdf">other research</a>). Meanwhile campaign group ShareAction reports that <a href="https://shareaction.org/news/paying-workers-a-real-living-wage-is-more-important-than-ever">only 50%</a> of FTSE100 companies pay the living wage. </p>
<p>But there is also an argument that society is guilty of double standards when corporate bosses are singled out for special pay outrage while pay extremes in other spheres are condoned.</p>
<h2>Soaring soccer pay</h2>
<p>Eye-watering pay inequity is also commonplace in professional sport. Manchester City’s <a href="https://www.dailymail.co.uk/sport/sportsnews/article-11287753/Erling-Haaland-earns-865-000-WEEK-Man-City.html">Erling Haaland</a> reportedly earns £850,000 a week gross (excluding other income from sponsorship and image rights deals) – that’s 1,328 times <a href="https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earningsandworkinghours/bulletins/annualsurveyofhoursandearnings/2022">median UK gross weekly pay</a> in 2022. French <a href="https://news.sky.com/story/kylian-mbappe-laliga-criticises-scandalous-deal-to-make-psg-star-worlds-highest-paid-footballer-12618564">football superstar Kylian Mbappé’s</a> contracted gross salary at Paris Saint-Germain is estimated at close to £1 million per week (not including image rights deals), or 1,562 times median UK gross pay.</p>
<figure class="align-center ">
<img alt="Man in blue uniform running, blurred crowd in the background." src="https://images.theconversation.com/files/544745/original/file-20230825-17-byibkj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/544745/original/file-20230825-17-byibkj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/544745/original/file-20230825-17-byibkj.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/544745/original/file-20230825-17-byibkj.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/544745/original/file-20230825-17-byibkj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/544745/original/file-20230825-17-byibkj.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/544745/original/file-20230825-17-byibkj.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Kylian Mbappe during the Ligue 1 football match between FC Lorient and Paris Saint Germain (PSG) on April 30, 2023 at Parc des Princes stadium in Paris, France.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/kylian-mbappe-during-ligue-1-football-2300548681">Victor Velter/Shutterstock</a></span>
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</figure>
<p>These superstars and the clubs that employ them attract limited public criticism, despite doing more than their fair share to foster pay inequity. Fans seem only too eager for their clubs to sign such statement players despite, even amid <a href="https://www.mirror.co.uk/sport/football/football-clubs-slammed-taking-advantage-27275646">increasing ticket prices</a>.</p>
<p>So why the apparent inconsistency in the scale and focus of moral outrage? One explanation is that we just don’t recognise the job corporate bosses do as being that remarkable. As a result, we’re not willing to accept high levels of pay inequity between CEOs and the rest of us. In contrast, even the most narcissistic football fan is probably willing to accept that they can’t replicate what Haaland and Mbappé do for their respective teams.</p>
<p>This outrage contradiction could indicate fundamental unfairness, but it may also reflect what we, as a society, choose to value and prioritise in the world of work.</p><img src="https://counter.theconversation.com/content/212088/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Steven Young receives funding from Economic & Social Research Council and the Financial Reporting Council. He is affiliated with CCLA through a research collabortation (not funded). </span></em></p>CEO pay often attracts more outrage than footballers’ record wages – what does this say about the value we place on different jobs and skills?Steven Young, Professor of Accounting, Lancaster UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2103732023-08-20T20:04:27Z2023-08-20T20:04:27ZYou don’t have to be an economist to know Australia is in a cost of living crisis. What are the signs and what needs to change?<p><em>This article is part of The Conversation’s series examining Australia’s cost of living crisis. You can read the other articles in the series <a href="https://theconversation.com/au/topics/cost-of-living-series-144357">here</a>.</em></p>
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<p>Every day the higher price of seemingly everything is mentioned in the news or in conversations with friends and acquaintances.</p>
<p>The impact is clear as we are required to pay more for most things from our weekly shop and power bills, to filling the car and swimming lessons.</p>
<p>So what is the cost of living and how is it measured?</p>
<p>The “cost of living” refers to the prices people need to pay to meet their needs in their everyday lives. </p>
<p>The most commonly cited measure is the <a href="https://www.abs.gov.au/websitedbs/d3310114.nsf/home/Consumer+Price+Index+FAQs">Consumer Price Index</a> compiled by the Australian Bureau of Statistics.</p>
<p>This represents the price of a fixed basket of goods and services. The items in the basket reflect the spending of metropolitan households. Each item is given a weight corresponding to its share in the spending of these households. The CPI does not include the price of land or financial assets such as shares.</p>
<p>The rate of change of prices is known as <a href="https://www.rba.gov.au/education/resources/explainers/inflation-and-its-measurement.html">inflation</a>.</p>
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<p>Inflation rose sharply in the 1970s, especially after the oil price shocks. It took a long while to get it down. The Reserve Bank adopted an <a href="https://www.rba.gov.au/education/resources/explainers/australias-inflation-target.html">inflation target of 2-3%</a> in the <a href="https://www.tandfonline.com/doi/full/10.1080/10370196.2019.1615401">early 1990s</a> to keep inflation low over the medium term. After a long period of low inflation, it rose sharply again during 2022.</p>
<p>It is now declining.</p>
<p>A similar pattern is seen in comparable economies such as the United States and New Zealand. The supply bottlenecks caused by COVID have eased and economic activity is slowing in response to the increases in interest rates in most economies.</p>
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<h2>Not all prices rise at the same rate</h2>
<p>Some prices rise fairly smoothly in line with the overall CPI. Others, such as petrol and fresh food, are much more volatile.</p>
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<p>Since 1972 the price of the CPI basket has increased almost 12-fold. But some prices have increased much more.</p>
<p>Cigarettes cost almost 60 times as much (reflecting increased taxes). Labour-intensive hairdressing costs 20 times as much. Prices of other goods have gone up much less, especially after Australia cut tariffs and started importing more from low-cost producers. Over the past decade the prices of clothing and computers have fallen.</p>
<p>People often believe inflation is higher than the CPI reports. Big price rises are more noticeable. You seldom see headlines about prices that have <em>not</em> changed. And when was the last time you heard a discussion about how clothing has been getting cheaper?</p>
<p>House prices are now more than 50 times as high as in 1972, a much larger increase than the CPI. Some of this, however, represents quality changes rather than pure price changes. The average Australian house has roughly doubled in size and may now be the <a href="https://theconversation.com/size-does-matter-australias-addiction-to-big-houses-is-blowing-the-energy-budget-70271">largest in the world</a>.</p>
<h2>My inflation is not the same as yours</h2>
<p>The CPI reflects the prices faced by an <em>average</em> household. About half of households will have experienced a higher increase in the prices they pay, and half will have seen a lower increase.</p>
<p>Different households consume different goods and services. Retirees tend to spend more on health care and less on childminding. A higher proportion of the spending of lower income households goes on necessities rather than luxuries. </p>
<p>For the “average” household, almost 4% of spending is on tobacco. But of course non-smokers spend nothing while heavy smokers spend much more. So that large rise in cigarette prices affects some people significantly and others not at all.</p>
<p>The ABS publishes some separate <em><a href="https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/selected-living-cost-indexes-australia/jun-2023">living cost indices</a></em>. The data get much less attention, partly because they are released after the CPI. These differ from the CPI in that they <a href="https://www.abs.gov.au/ausstats/abs@.nsf/Lookup/6467.0Feature+Article1Mar+2017">include interest charges</a>. They are also prepared relating to different classes of people. </p>
<p>Over the year to June 2023, the living costs of employees rose by 9.6% but those of self-funded retirees by 6.3% and age pensioners by 6.7%. The main reason for the difference was that interest rates increased and employees are more likely to have a mortgage than are retirees. </p>
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<p>These compare to the <a href="https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/consumer-price-index-australia/latest-release">6% increase in the CPI</a> over the same period.</p>
<h2>Cost of living problem</h2>
<p>The cost of living becomes an increasing problem when incomes, notably wages, fail to keep up with it. Over long periods of time, wages tend to grow faster than prices. The economy becomes more productive over time and the gains flow to both workers and companies.</p>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/underlying-inflation-has-slipped-below-6-but-is-the-slide-enough-to-stop-the-rba-pushing-up-rates-further-209852">Underlying inflation has slipped below 6%, but is the slide enough to stop the RBA pushing up rates further?</a>
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<p>But over shorter periods, this may not be the case. Last week’s <a href="https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/wage-price-index-australia/jun-2023">data</a> show wages grew by only 3.6% over the year to the June quarter. This is well below the current inflation rate of 6%. But it is around the growth in prices <a href="https://www.rba.gov.au/publications/smp/2023/aug/pdf/05-economic-outlook.pdf">forecast</a> by the Reserve Bank for the coming year.</p>
<p>As well as an income for workers, wages are a major cost for businesses. So if wages grow too fast, and particularly were they to accelerate, there is a risk of a wage-price spiral. </p>
<p>The 3.6% annual wage increase for the June quarter is slightly less than the 3.7% recorded in the March quarter. The quarterly growth rate has been steady at 0.8% for the past three quarters. If labour productivity grows close to its medium-term average, this size of wage increase should not be a concern.</p>
<p>If business starts to expect raw material and input prices, and prices charged by their competitors, to keep growing strongly, they will be likely to keep increasing their own prices a lot. This risks a <a href="https://www.axios.com/2023/05/18/once-a-fringe-theory-greedflation-gets-its-due">price-price spiral</a>.</p>
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<p>The Reserve Bank is trying to steer the economy along what it calls a narrow path.</p>
<p>It hopes it has raised interest rates enough to slow the economy and return inflation to its 2-3% target within a reasonable time frame. But it hopes it has not raised them too far, which would push the economy into a recession and lead to a large rise in unemployment.</p>
<p>The bank’s goal is to have the cost of living rising by around 2-3% per year and incomes a bit more than this, so living standards steadily improve for all Australians over time.</p><img src="https://counter.theconversation.com/content/210373/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>John Hawkins was formerly a senior economist with the Reserve Bank and Australian Treasury.</span></em></p>Official data confirms what we are all experiencing - the cost of most things has jumped. So how is this measured and where are the biggest increases?John Hawkins, Senior Lecturer, Canberra School of Politics, Economics and Society, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2110502023-08-04T14:19:20Z2023-08-04T14:19:20ZUK interest rates: crashing the economy is no way to bring down inflation<figure><img src="https://images.theconversation.com/files/541238/original/file-20230804-495-ugyy8l.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">It won't hurt a bit. </span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-illustration/3d-illustration-creative-red-car-crash-2322994587">Kevin CC</a></span></figcaption></figure><p>The Bank of England (BoE) has <a href="https://www.bankofengland.co.uk/monetary-policy-summary-and-minutes/2023/august-2023">raised</a> interest rates once again to 5.25%, mirroring similar moves by the <a href="https://www.federalreserve.gov/newsevents/pressreleases/monetary20230726a.htm">Federal Reserve</a> and the <a href="https://www.ecb.europa.eu/press/pr/date/2023/html/ecb.mp230727%7Eda80cfcf24.en.html">European Central Bank</a>. The fact that the UK is still suffering from <a href="https://www.cnbc.com/2023/07/19/uk-inflation-rate-slides-to-7point9percent-in-june-below-expectations.html">high inflation</a> – higher than either <a href="https://www.bbc.co.uk/news/business-66178936">the US</a> or <a href="https://www.thetimes.co.uk/article/eurozone-surprises-with-faster-growth-as-inflation-hits-new-low-kzj7wtgj0">eurozone</a> – made another rate rise appear inevitable.</p>
<p>Yet there are reasons to doubt the merits and effectiveness of this approach. The UK’s efforts to bring down inflation quickly could be risking the health of the economy. </p>
<p>It is important to understand how monetary policy “works”. In effect, the BoE is seeking to make <a href="https://www.bbc.com/news/business-65308769">households</a> in particular poorer so they spend less. The idea is you dampen down demand to bring it into line with supply, so that upward pressure on prices can be curbed. </p>
<p>The other effect of raising rates is to reduce the wage demands of workers by <a href="https://www.theguardian.com/business/grogonomics/2023/feb/09/the-reserve-bank-wants-unemployment-to-rise-it-should-be-careful-what-it-wishes-for">creating unemployment</a>. This is not the publicly stated goal, but it lies behind the rhetoric of wage restraint that the BoE <a href="https://www.ft.com/content/4973fd9c-641f-4df2-87c3-bff77eb2406f">continually espouses</a> – despite nominal wage growth <a href="https://www.hrmagazine.co.uk/content/news/real-wages-rise-for-first-time-in-18-months/">only recently</a> matching inflation.</p>
<p>The current approach to monetary policy accepts a recession as a price worth paying, while implying a belief that higher unemployment leads to lower inflation. This can be disputed on economic grounds - in the UK in the recent past, low inflation was achieved with low unemployment, so the idea that there is a necessary trade-off between inflation and unemployment can be refuted historically. </p>
<p>There are also moral objections to current monetary policy. It can be argued that the BoE should have a responsibility to protect living standards, not harm them. Its mandate of achieving a 2% inflation target should not be at any cost. Creating unemployment will impose misery on many workers and have scarring effects on the economy, from lost skills to reduced industrial capacity, which may be difficult to heal.</p>
<h2>The economic reality</h2>
<p>The current inflation is also not a classic case of “too much money chasing too few goods”. There are pressures from higher <a href="https://www.ons.gov.uk/economy/inflationandpriceindices/articles/foodandenergypriceinflationuk/2023">food and energy prices</a> linked to factors like Brexit and the Ukraine war that cannot be controlled by raising interest rates. </p>
<p>There are also structural problems in the UK, such as labour shortages due to increases in economic inactivity – the result of more over-50s leaving the workforce and rises in ill health. These problems are seen to have put <a href="https://publications.parliament.uk/pa/ld5803/ldselect/ldeconaf/115/11504.htm">upward pressure on wages</a>, and require responses beyond raising interest rates if they are to be fully addressed. </p>
<p>For example, they require new investment in the health sector to help alleviate hospital waiting lists. A better-funded NHS would create a healthier workforce, overcoming current limits on labour supply due to poor health that are seen to be creating inflationary pressures. </p>
<p>In any case, inflation is set to come down – the BoE’s <a href="https://www.bankofengland.co.uk/-/media/boe/files/monetary-policy-report/2023/august/mpr-august-2023-opening-remarks-slides.pdf">own forecasts</a> show this. Monetary tightening at this stage is therefore short-sighted and probably counterproductive – especially when the BoE thinks deflation is distinctly possible in the next couple of years. A more cautious approach to monetary policy seems in order.</p>
<p>Other countries have followed different policies with different effects. <a href="https://www.theguardian.com/commentisfree/2023/aug/03/spain-inflation-lower-bank-england-interest-rates">Spain</a>, for instance, has used mechanisms such as price controls on things like rents and energy to help curb inflation (the UK did also cap energy bills, though not as aggressively). This has helped to reduce inflation while keeping employment high. It shows that crashing the economy is not the only route to low inflation.</p>
<p>In short, the BoE is simply compounding problems rather than solving them through its actions. It is time it learnt the limits of its own policies, while the government needs to play a role too. </p>
<p>In the short term, attention should be given to controlling prices (including energy) and making businesses show restraint in their pricing behaviour. Longer term, greater investment in skills, health and productive capacity is needed to create an economy that allows for rising real living standards with full employment.</p><img src="https://counter.theconversation.com/content/211050/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>David Spencer receives funding from the ESRC</span></em></p><p class="fine-print"><em><span>Muhammad Ali Nasir does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The Bank of England has just raised rates for the 14th time in a row to 5.25%.David Spencer, Professor of Economics and Political Economy, University of LeedsMuhammad Ali Nasir, Associate Professor in Economics, University of LeedsLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2078072023-06-18T20:08:27Z2023-06-18T20:08:27ZTired of shrinking pay? The real drain on Australians’ productivity is falling wages<figure><img src="https://images.theconversation.com/files/532183/original/file-20230615-19-45iygu.png?ixlib=rb-1.1.0&rect=25%2C250%2C1750%2C911&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>When was the last time you got a pay increase? Was it anywhere near the rate of inflation? </p>
<p>If it feels as if your wage is shrinking and cost of living pressures are growing, you’re in good company. And it might just be harming productivity. Here’s why.</p>
<p>Labor productivity (measured as gross domestic product per hour worked) has been shrinking for a year now, after decades of reasonable, albeit declining, productivity growth throughout the 1980s, 1990s and the first two decades of the 2000s.</p>
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<p><a href="https://theconversation.com/we-know-how-to-boost-productivity-and-lift-wages-but-it-will-take-time-and-much-tougher-tax-reform-207609">All sorts of reasons</a> have been suggested. One is working from home. Commonwealth Bank chief Matt Comyn has ordered staff to <a href="https://www.afr.com/work-and-careers/workplace/cba-orders-staff-back-to-the-office-20230518-p5d9l6">return to the office</a> saying there are “certain types of work that are done more effectively in person”.</p>
<p>Reserve Bank research says it might be a resurgence in the proportion of wages set by industry awards rather than workplace agreements, meaning there’s less scope for rewarding performance. </p>
<p>Another is weak wage growth itself.</p>
<h2>Shrinking real wages are demotivating</h2>
<p>We must also look at wages. Wages are falling in inflation-adjusted (“real”) terms.</p>
<p>Adjusted for inflation, Australians are being paid less than they were in 2020.</p>
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<p>Shrinking real wages are demotivating. While this is hardly a new insight, a bemusing number of people seem shocked by the idea that someone might be less keen to work when the real value of what they are paid is falling.</p>
<p>Research on executive compensation established this <a href="https://linkinghub.elsevier.com/retrieve/pii/0304405X7690026X">as long ago as the 1970s</a>. </p>
<p>The whole field of compensation contract theory is based on the insight that a person’s sense of wellbeing goes up with money but down with perceived effort and risk. Money can induce people to work in ways they otherwise would not.</p>
<p>Company boards have long used <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4400226">incentives</a> to encourage otherwise-cautious executives to take risks. They even <a href="https://doi.org/10.1016/j.jfineco.2016.01.022">tailor compensation contracts</a> to executives’ behavioral traits. </p>
<h2>How do workers produce less?</h2>
<p>Consciously or otherwise, workers whose real wages are falling might care less about their jobs. They might work more slowly, or they produce worse-quality goods or services. And their attitude might permeate to other workers and to clients, undermining productivity more broadly.</p>
<p>If this happens at enough corporations – and certainly real wages are falling at enough corporations – it will harm GDP per hour worked throughout the entire economy. </p>
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<span class="caption">Poorly paid workers watch the clock.</span>
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<p>Sluggish wage growth can also affect the number of observed hours worked. </p>
<p>When wage growth and incentives are strong, ambitious workers will work more than their contracted hours, and won’t claim for it. </p>
<p>They might work on weekends and nights, easing staff scheduling and time zone issues, helping the firm do what it needs to do. </p>
<p>Uncounted extra hours don’t increase the “hours” in GDP per hour, but they do increase the GDP, increasing measured productivity. </p>
<p>When people stop doing unpaid overtime, while their recorded hours mightn’t much change, the GDP they produce declines. </p>
<p>There are reasons to believe Australian workers are no longer going above and beyond to produce more to the extent that they used to.</p>
<p>One is an increase in the number of Australians holding multiple jobs.</p>
<p>Over the past five years, the proportion of Australian workers holding more than one job has climbed from 6% to 6.7%, which appears to be an all-time high.</p>
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<p>These official figures understates the extent to which Australians are turning their focus away from their main jobs for three reasons:</p>
<ul>
<li><p>they exclude side hustles not counted as “jobs”</p></li>
<li><p>they exclude jobs in the cash economy </p></li>
<li><p>they exclude workers whose “new” second job is spending time with their family rather than working overtime.</p></li>
</ul>
<p>The rise in multiple job holders is likely to both increase the total number of hours worked, and reduce the effort workers put into their main jobs.</p>
<p>And, as these second jobs are often more junior, it can mean highly-skilled workers producing less per hour than they would have had they put the hours in their main job.</p>
<p>The overall picture is one of a demotivated workforce realising there is no longer much point in “going the extra mile”, “going above and beyond”, or buying into whatever the latest euphemism is. </p>
<h2>Returning to the office might make things worse</h2>
<p>Although returning to the office might is touted as a way to boost productivity by <a href="https://www.afr.com/policy/economy/banks-push-for-office-return-amid-productivity-woes-20230601-p5dd1u">building collaboration</a>, it might well do the reverse.</p>
<p>There is <a href="https://dx.doi.org/10.1080/13504851.2014.922663">ample evidence</a> to show that workers hate commuting. In capital cities, commuting can consume two hours per day driving, parking and allowing time for unexpected delays.</p>
<p>It is also costly. Workers will tolerate it if there is no other choice or it is a clear path to more money. </p>
<p>But if companies reinstate a two-hour commute and associated costs without paying more money, they are likely to further demotivate their workers, further undermining their willingness to “go above and beyond”, produce more, and be more efficient.</p>
<h2>What’s needed are incentives</h2>
<p>A straightforward solution is to create incentives that make it clear that workers who care more will get cared for more.</p>
<p>The incentives need to be in addition to standard raises. Using them as a cynical ploy to hold wages constant unless employees work ever harder will backfire.</p>
<p>The incentives must also be credible. It isn’t enough to create the vague possibility of promotions. Employers have to demonstrate that if their workers produce more they will be paid more. And the extra pay needs to be enough to matter.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/dont-blame-workers-for-falling-productivity-theyre-not-holding-it-back-207594">Don't blame workers for falling productivity: they're not holding it back</a>
</strong>
</em>
</p>
<hr>
<p>An even better solution would be job-hopping.</p>
<p>Australians have long been <a href="https://theconversation.com/australias-great-resignation-is-a-myth-we-are-changing-jobs-less-often-170784">lethargic</a> about changing jobs, allowing themselves to be hit with a “loyalty tax” for staying put.</p>
<p>The most recent Bureau of Statistics survey, for the year to February 2022, shows an overdue uptick in the proportion of workers switching jobs, from 7.5% to 9.5%.</p>
<p>The <a href="https://www.abs.gov.au/statistics/labour/jobs/job-mobility/latest-release">2023 update</a> will be released at the end of this month.</p>
<hr>
<p><iframe id="xMbQi" class="tc-infographic-datawrapper" src="https://datawrapper.dwcdn.net/xMbQi/4/" height="400px" width="100%" style="border: none" frameborder="0"></iframe></p>
<hr>
<p>The importance of job-hopping (switching jobs to get better reward) as a means of incentivising both workers and employers makes Labor’s proposed expansion of <a href="https://www.dewr.gov.au/secure-jobs-better-pay/resources/cooperative-workplaces-bargaining-stream">industry-wide enterprise bargaining</a> a bad idea.</p>
<p>If employers set wages together, they are unlikely to set them differently.</p>
<p>In any event, there is little sign that employers are interested in motivating their workers to produce more. It’s easier to blame workers and make a case for low pay rises.</p><img src="https://counter.theconversation.com/content/207807/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Mark Humphery-Jenner does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Adjusted for inflation, Australians are being paid less than they were in 2020. These 4 charts show what’s changed in how we work – and the growing gap between your pay and what you can afford to buy.Mark Humphery-Jenner, Associate Professor of Finance, UNSW SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2076092023-06-15T01:27:17Z2023-06-15T01:27:17ZWe know how to boost productivity and lift wages – but it will take time and much tougher tax reform<p>The slide in Australia’s labour productivity – real gross domestic product per hour worked – has become a real concern. In the past year, labour productivity has fallen <a href="https://www.abs.gov.au/statistics/economy/national-accounts/australian-national-accounts-national-income-expenditure-and-product/latest-release#key-tables">4.6%</a>.</p>
<p>Unless it resumes growing, either wage growth will need to slide to the Reserve Bank’s inflation target of <a href="https://www.rba.gov.au/education/resources/explainers/australias-inflation-target.html">2-3%</a> on average over time, or the bank will need to keep pushing up rates until it does.</p>
<p>This is because, as Reserve Bank Governor Philip Lowe pointed out in a <a href="https://www.rba.gov.au/speeches/2023/sp-gov-2023-06-07.html">speech</a> last week, over time increases in the consumer price index move in line with increases in <a href="https://www.abs.gov.au/statistics/detailed-methodology-information/concepts-sources-methods/australian-system-national-accounts-concepts-sources-and-methods/2020-21/chapter-20-analytical-measures/unit-labour-costs">unit labour costs</a> (wage increases divided by increases in labour productivity).</p>
<p>This means that if there is no increase in labour productivity – and right now there isn’t – the consumer price index will come to reflect only wage increases, and the bank will try to bring both down to <a href="https://www.rba.gov.au/monetary-policy/framework/stmt-conduct-mp-7-2016-09-19.html">2-3%</a>, “on average, over time”.</p>
<hr>
<h2>Unit labour costs versus consumer price index</h2>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/531878/original/file-20230614-25-z3g0a3.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/531878/original/file-20230614-25-z3g0a3.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/531878/original/file-20230614-25-z3g0a3.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=317&fit=crop&dpr=1 600w, https://images.theconversation.com/files/531878/original/file-20230614-25-z3g0a3.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=317&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/531878/original/file-20230614-25-z3g0a3.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=317&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/531878/original/file-20230614-25-z3g0a3.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=398&fit=crop&dpr=1 754w, https://images.theconversation.com/files/531878/original/file-20230614-25-z3g0a3.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=398&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/531878/original/file-20230614-25-z3g0a3.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=398&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Index numbers, March quarter 1993 = 100.</span>
<span class="attribution"><a class="source" href="https://www.rba.gov.au/speeches/2023/sp-gov-2023-06-07.html">RBA</a></span>
</figcaption>
</figure>
<hr>
<p>In previous decades labour productivity growth has averaged 2.4% and 2.2%, and most recently 1.1%, allowing wages growth of at least one percentage point above the Reserve Bank’s inflation target without accelerating inflation.</p>
<p>But, for the moment, that no longer seems possible.</p>
<hr>
<h2>Average labour productivity growth the slowest in 60 years</h2>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/531872/original/file-20230614-23-ffx4ca.PNG?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/531872/original/file-20230614-23-ffx4ca.PNG?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/531872/original/file-20230614-23-ffx4ca.PNG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=267&fit=crop&dpr=1 600w, https://images.theconversation.com/files/531872/original/file-20230614-23-ffx4ca.PNG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=267&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/531872/original/file-20230614-23-ffx4ca.PNG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=267&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/531872/original/file-20230614-23-ffx4ca.PNG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=335&fit=crop&dpr=1 754w, https://images.theconversation.com/files/531872/original/file-20230614-23-ffx4ca.PNG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=335&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/531872/original/file-20230614-23-ffx4ca.PNG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=335&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Average labour productivity growth per year, calculated as GDP per hour worked.</span>
<span class="attribution"><a class="source" href="https://www.pc.gov.au/inquiries/completed/productivity/report">Productivity Commission</a></span>
</figcaption>
</figure>
<hr>
<h2>Why productivity growth is sliding</h2>
<p>Sliding productivity growth is a worldwide phenomenon. An Australian Productivity Commission report earlier this year found only <a href="https://www.pc.gov.au/inquiries/completed/productivity/report/productivity-volume2-keys-to-growth.pdf">one</a> advanced economy (Israel) in which average annual productivity growth was higher after 2005 than in the decades before it.</p>
<p>One possible reason for the current decline, <a href="https://www.rba.gov.au/speeches/2023/sp-gov-2023-06-07.html">suggested by the governor</a>, is that during the COVID pandemic, firms concentrated on surviving rather than seeking out more efficient ways to produce. </p>
<p>This is an optimistic suggestion, as it implies productivity growth will rebound.</p>
<p>Another suggestion would be that technology is luring workers into unproductive, time-consuming tasks instead of work. </p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/531889/original/file-20230614-25-k7vsby.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/531889/original/file-20230614-25-k7vsby.png?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/531889/original/file-20230614-25-k7vsby.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=965&fit=crop&dpr=1 600w, https://images.theconversation.com/files/531889/original/file-20230614-25-k7vsby.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=965&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/531889/original/file-20230614-25-k7vsby.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=965&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/531889/original/file-20230614-25-k7vsby.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1213&fit=crop&dpr=1 754w, https://images.theconversation.com/files/531889/original/file-20230614-25-k7vsby.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1213&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/531889/original/file-20230614-25-k7vsby.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1213&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Is email sapping productivity?</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
</figcaption>
</figure>
<p>Many of us spend a good deal of time each day responding to emails (including those from colleagues who insist on annoying “reply all” thank you notes).</p>
<p>A longer-term factor would be that service industries now dominate employment in Australia. Such industries include retail, hospitality and social assistance: areas where there is <a href="https://www.pc.gov.au/ongoing/productivity-insights/services">less room</a> to lift – or even measure – productivity than there was in the industries that used to dominate, such as manufacturing and agriculture.</p>
<p>And while the fall in unemployment to near a 50-year low is good news, it is likely that some of the long-term unemployed now getting jobs are not as productive, at least initially. </p>
<p>Opposition leader Peter Dutton’s <a href="https://www.theguardian.com/australia-news/2023/may/14/labor-leaves-door-open-for-jobseeker-recipients-to-work-more-hours-before-losing-payments">proposal</a> to allow unemployed Australians to work more hours before losing benefits would have a similar effect.</p>
<p>Also, the link between productivity growth and wages may run the other way. Falling real wages makes labour cheaper for firms, which might deter them from investing in the equipment needed to boost labour productivity. </p>
<p>As real wages growth fell to long-term lows over the past decade, the share of national income businesses devoted to investment slumped.</p>
<hr>
<h2>Business investment as a share of GDP</h2>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/531882/original/file-20230614-17-bb9fjr.PNG?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/531882/original/file-20230614-17-bb9fjr.PNG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=321&fit=crop&dpr=1 600w, https://images.theconversation.com/files/531882/original/file-20230614-17-bb9fjr.PNG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=321&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/531882/original/file-20230614-17-bb9fjr.PNG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=321&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/531882/original/file-20230614-17-bb9fjr.PNG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=403&fit=crop&dpr=1 754w, https://images.theconversation.com/files/531882/original/file-20230614-17-bb9fjr.PNG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=403&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/531882/original/file-20230614-17-bb9fjr.PNG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=403&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Adjusted for second-hand asset transfers between the private and other sectors.</span>
<span class="attribution"><a class="source" href="https://www.rba.gov.au/chart-pack/">RBA, ABS</a></span>
</figcaption>
</figure>
<hr>
<p>In a <a href="https://www.pc.gov.au/inquiries/completed/productivity/report#media-release">landmark report</a> in March, the Productivity Commission said it wanted education quality improved and loan eligibility for tertiary students expanded. </p>
<p>And it wanted better-targeted skilled migration and award wages adjusted more fairly and efficiently. </p>
<p>It said the few remaining tariffs on imported goods should be removed and the government’s <a href="https://www.cleanenergyregulator.gov.au/NGER/The-safeguard-mechanism">safeguards mechanism</a> made the primary means of transitioning to net zero greenhouse gas emissions.</p>
<p>It also wanted tax reform, “towards less distortive, more efficient approaches”. </p>
<h2>Tax and the Stage 3 cuts in the frame</h2>
<p>Views differ on how to reform taxes. We argue reform should be guided by the principle that we should increase taxes on things we want to discourage (such as greenhouse gas emissions and smoking) and lower them on things we want to encourage (such as work and innovation). </p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/515679/original/file-20230316-14-3sqpzl.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/515679/original/file-20230316-14-3sqpzl.png?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/515679/original/file-20230316-14-3sqpzl.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=967&fit=crop&dpr=1 600w, https://images.theconversation.com/files/515679/original/file-20230316-14-3sqpzl.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=967&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/515679/original/file-20230316-14-3sqpzl.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=967&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/515679/original/file-20230316-14-3sqpzl.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1215&fit=crop&dpr=1 754w, https://images.theconversation.com/files/515679/original/file-20230316-14-3sqpzl.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1215&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/515679/original/file-20230316-14-3sqpzl.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1215&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><a class="source" href="https://www.pc.gov.au/inquiries/completed/productivity/report">Productivity Commission</a></span>
</figcaption>
</figure>
<p>Other purely revenue-raising taxes would be ones that did not distort decisions, such as taxes on land (which if anything would cause land to be used more efficiently) and taxes on super-profits of resource companies (which would not dissuade businesses from extraction, because it would remain profitable).</p>
<p>Any cuts in income tax rates should focus on encouraging the marginal workers who are actually likely to be persuaded to work more hours. These are generally low and middle earners, and are often mothers considering returning to work.</p>
<p>On fairness grounds, taxes should be directed towards those who could best pay. </p>
<p>Each of these criteria builds a case for redesigning the so-called Stage 3 tax cuts due to come into effect next year.</p>
<p>Not every Productivity Commission suggestion in the nine-volume report, or other suggestions, will be worth taking on board. But that’s no reason not to discuss them. None will get quick results, but that makes starting all the more urgent.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/dont-blame-workers-for-falling-productivity-theyre-not-holding-it-back-207594">Don't blame workers for falling productivity: they're not holding it back</a>
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<img src="https://counter.theconversation.com/content/207609/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>John Hawkins was formerly a senior economist and forecaster at the Reserve Bank and Treasury.</span></em></p><p class="fine-print"><em><span>Craig Applegate used to work for the Commonwealth Treasury many years ago and is an inactive member of the Labor party. Craig is also the University of Canberra branch president of the National Tertiary Education Union but our opinions expressed in this article are entirely personal in nature and in no way reflect the views or policies of the NTEU and its membership.</span></em></p>Unless we boost productivity, wages growth could sink back to 2-3%. The Productivity Commission has some good solutions – and we’d argue redesigning the Stage 3 tax cuts should be on the list too.John Hawkins, Senior Lecturer, Canberra School of Politics, Economics and Society, University of CanberraCraig Applegate, IGPA fellow, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2060392023-05-24T15:19:06Z2023-05-24T15:19:06ZPrice inflation: five ways stronger UK supply chains can help reduce rising food costs<figure><img src="https://images.theconversation.com/files/527826/original/file-20230523-19-ys3t1z.jpg?ixlib=rb-1.1.0&rect=0%2C65%2C5462%2C3605&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/aerial-view-truck-hay-bales-agricultural-1789663295">Denis Belitsky/Shutterstock</a></span></figcaption></figure><p>Annual price inflation has recently fallen below double digits, but food costs are still rising rapidly. <a href="https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/consumerpriceinflation/latest">Official UK figures show food prices rose by 19.1%</a> in the year to April 2023.</p>
<p>To prevent further increases, the UK needs to face up to the deep and fundamental relationship between the rising cost of food and how it is supplied nationally.</p>
<p>At Downing Street’s recent Farm to Fork summit for the UK food industry, at least <a href="https://www.gov.uk/government/publications/outcomes-from-the-uk-farm-to-fork-summit/an-update-following-the-uk-farm-to-fork-summit-held-at-10-downing-street-on-16-may-2023#skills-and-sufficient-labour">eight key commitments</a> were made relating to supporting innovation, skills and labour, farming schemes, fair supply chains, exports, water and energy security, and cutting red tape.</p>
<p>These are fair and wise areas to address, but action speaks louder than words. Food producers, retailers and other supply chain actors all have a role to play in <a href="https://www.emerald.com/insight/content/doi/10.1108/TG-08-2017-0050/full/html">shaping policy and practice</a> to improve UK supply chains and reduce food prices.</p>
<h2>Why do we have inflated food prices?</h2>
<p>The UK should not be in this position in 2023. This is part self-inflicted, as well as down to historical events and external influences. In 2022, the Ukraine war caused hikes in <a href="https://www.theguardian.com/business/2023/may/13/why-are-uk-food-prices-still-rocketing-and-when-will-it-stop">gas, wheat and sunflower oil prices</a> due to product unavailability.</p>
<p>More recently though, the root cause of food price inflation is reportedly less event-driven and more business-derived. “<a href="https://www.theguardian.com/business/2023/mar/12/global-greedflation-big-firms-drive-shopping-bills-to-record-highs">Greedflation</a>”, or profiteering by companies, is increasingly being blamed for high prices.</p>
<p>Whatever its cause, the Resolution Foundation thinktank says: </p>
<blockquote>
<p>Food price shock is about to overtake the energy price shock as the <a href="https://www.resolutionfoundation.org/publications/food-for-thought/">biggest threat to family finances</a>.</p>
</blockquote>
<p>This price inflation also needs to be brought under control. To make this happen, the food supply chain must promote UK food security, which means access to food at affordable prices. But there are at least five fundamental issues that require attention before the government’s latest pledges can be enacted and realised. </p>
<h2>1. Feed, fertiliser and fuel costs</h2>
<p>As Ash Amirahmadi, head of UK dairy company Arla Foods, has <a href="https://www.independent.co.uk/news/uk/arla-fuel-prices-cows-ukraine-b2043926.html">repeatedly pointed out</a>, a major driver for food price rises and wholesale <a href="https://www.ons.gov.uk/economy/inflationandpriceindices/articles/costoflivinginsights/food">food price inflation hitting almost 20%</a> is the rise in feed, fertiliser and fuel costs. Managing these costs where possible within the supply chain, and identifying where government subsidies can be introduced, will contribute to a decrease in food prices.</p>
<h2>2. Retailer profits</h2>
<p>Here in the UK, supermarkets have rigid contracts. During shortages and prices hikes, rising costs can be passed on to consumers. But in a highly price sensitive environment, such as during <a href="https://theconversation.com/why-supermarkets-are-rationing-food-and-how-to-prevent-future-shortages-200557">supply shortages</a>, supermarkets may not want to charge customers more, and so costs are absorbed by farmers and their suppliers instead.</p>
<p>Food retailers, shops and supermarkets have to keep running their businesses. The <a href="https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/producerpriceinflation/march2023includingservicesjanuarytomarch2023">prices these companies sell their products for</a> incorporate the costs of production, transport and also additional profits. </p>
<p>Supermarkets such as <a href="https://www.bbc.co.uk/news/business-65312127">Tesco and Sainsbury’s</a> calculate profit margins at an average of between 3.1p and 4.1p in the pound. Releasing at least a penny or two from this margin would enable a reduction in the final cost paid by the consumer. Sainsbury’s says it has spent <a href="https://about.sainsburys.co.uk/news/latest-news/2023/27-04-23-preliminary-results">£560 million keeping prices low </a> over the last two years, but have customers actually seen this in their daily shop? </p>
<h2>3. Wage increases</h2>
<p>Food supply chains are highly interconnected – including the pay element. Workers need <a href="https://www.gov.uk/national-minimum-wage-rates">national minimum wage rises</a> as part of a wholesale improvement to tackle employability and improve job market prospects. These increases also have a positive impact on cost of living concerns, of course. </p>
<p>But labour costs also eat into the profit margins of food retailers and suppliers, and contribute to the total cost of food. Reviewing pay for those in the food sector may be very challenging or simply not possible given cost of living pressures on households at the moment. Employees need and deserve salary increments – but when and by how much should be considered in the overall context of price inflation, alongside manufacturing, logistics and other costs. </p>
<h2>4. Labour shortages</h2>
<p>General labour shortages in the logistics and supply sector are directly affecting the supply of food. There are simply <a href="https://www.gov.uk/government/statistics/recent-challenges-faced-by-food-and-drink-businesses-and-their-impact-on-prices">not enough drivers, logistics, procurement, shipping and warehousing staff nationally</a> to meet existing – let alone future – demand. Finding, funding and <a href="https://www.ft.com/content/37f898e5-7580-44a2-a204-72f9dc72b085">facilitating workforce skills development</a> to get the chain moving is critical to supply chain performance and overall costs. </p>
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<img alt="Red truck cab driving along an empty road with grey clouds in the background." src="https://images.theconversation.com/files/527996/original/file-20230524-25-bqw76h.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/527996/original/file-20230524-25-bqw76h.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/527996/original/file-20230524-25-bqw76h.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/527996/original/file-20230524-25-bqw76h.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/527996/original/file-20230524-25-bqw76h.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/527996/original/file-20230524-25-bqw76h.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/527996/original/file-20230524-25-bqw76h.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Labour including drivers to supply food are in short supply in the UK.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/truck-on-highway-301750778">lassedesignen/Shutterstock</a></span>
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<h2>5. Food prices</h2>
<p>Food prices are generally set well in advance, through production planning horizons and futures contracts on perishable food staples. These factor in the forecast cost of energy and fertiliser, <a href="https://www.bbc.co.uk/news/business-62723567">which have also been rising sharply</a>.</p>
<p>Predictions of <a href="https://www.theguardian.com/business/2023/may/21/inflation-is-on-the-wane-but-a-longed-for-sharp-drop-is-far-from-in-the-bag">inflation reduction in 2023</a> have already been refuted as food prices continue to rise. This highlights the complex set of issues rooted in the engagement, involvement, interests and economic behaviour of chain actors. For the UK, this is enacted on a local level through growers, manufacturers, distributors and retailers.</p>
<h2>What are the next steps to promote food security?</h2>
<p>Lack of access to consumer products is not a new phenomenon. Major events such as Brexit and the COVID pandemic have already taken their toll on <a href="https://www.ons.gov.uk/businessindustryandtrade/internationaltrade/articles/earlyinsightsintotheimpactsofthecoronaviruspandemicandeuexitonbusinesssupplychainsintheuk/february2021tofebruary2022">UK supply chains</a>. We are still seeing shortages in many vital products such as <a href="https://www.weforum.org/agenda/2023/02/why-is-world-experiencing-medicine-shortages-and-how-can-the-generics-industry-address-supply-challenges/">medicines</a>, <a href="https://news.sky.com/story/semiconductor-strategy-1631bn-for-vital-microchip-sector-faces-criticism-12883968">semiconductors</a>, and <a href="https://www.weforum.org/agenda/2022/07/electric-vehicles-world-enough-lithium-resources/">lithium</a> for batteries – often for the same reasons as the shortages in our food supply chains.</p>
<p>As international conflict, energy and climate crises unfold and continue into the future, food supply chains must work within these constraints to ensure
<a href="https://www.emerald.com/insight/content/doi/10.1108/TG-08-2017-0050/full/html">food security</a>. Coordinated agreement for change is a must. And market makers such as food producers, distributors and retailers need to consider absorbing more corporate risk, in the form of reduced profits, “for the greater good”.</p><img src="https://counter.theconversation.com/content/206039/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Amir Sharif receives funding from the NIHR and has received research grant funding from the UKRI (MRC, Innovate UK) and British Council. He is a Fellow of the Royal Society of Arts, Institute for Leadership and Management and is a Member of the Chartered Management Institute. </span></em></p><p class="fine-print"><em><span>Kamran Mahroof and Liz Breen do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Change and communication across the food supply chain will help stop prices from rising further.Amir M. Sharif, Dean of the Faculty of Management, Law and Social Sciences and Professor of Circular Economy, University of BradfordKamran Mahroof, Associate Professor, Supply Chain Analytics, University of BradfordLiz Breen, Director of the Digital Health Enterprise Zone (DHEZ), University of Bradford, Professor of Health Service Operations, University of BradfordLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2045212023-05-24T13:40:38Z2023-05-24T13:40:38ZWhy profits, not pay, have caused the cost of living crisis<figure><img src="https://images.theconversation.com/files/527752/original/file-20230523-29-w662k2.jpg?ixlib=rb-1.1.0&rect=178%2C95%2C7618%2C5130&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Budgeting for a rising cost of living.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/mature-middleaged-couple-family-wife-husband-1994498774">Inside Creative House/Shutterstock</a></span></figcaption></figure><p>The Bank of England accompanied its most recent UK interest rate hike – <a href="https://www.bankofengland.co.uk/monetary-policy-summary-and-minutes/2023/may-2023">the 12th in a row</a> – with a warning that UK price inflation is likely to be <a href="https://uk.finance.yahoo.com/news/bank-england-lifts-interest-rates-110713037.html">higher for longer than expected</a> due to soaring food costs. The bank has been hiking rates since December 2021 to try to stop a sharp rise in the cost of living. And while the rate of inflation <a href="https://www.theguardian.com/business/2023/may/24/uk-inflation-falls-cost-of-living-crisis">dropped significantly in April</a>, at 8.7% it remains well above the UK’s 2% target.</p>
<p>Many reasons have been given for recent price inflation: central banks have <a href="https://www.investorschronicle.co.uk/news/2023/05/10/did-central-banks-cause-today-s-inflation-spiral/">“printed” too much money</a>, wars in other countries have <a href="https://www.theguardian.com/business/2023/feb/21/energy-crisis-ukraine-war-uk-cost-gas">pushed up energy prices</a>. The <a href="https://news.sky.com/story/rishi-sunak-says-public-sector-pay-rises-will-fuel-inflation-economists-say-they-wont-12779761#:%7E:text=Rishi%20Sunak%20has%20said%20he,prices%20in%20a%20perpetual%20loop.">current government</a> and the <a href="https://www.theguardian.com/business/2022/feb/04/bank-of-england-boss-calls-for-wage-restraint-to-help-control-inflation">governor of the Bank of England</a> believe that wage increases cause inflation. </p>
<p>But <a href="https://www.versobooks.com/en-gb/products/3146-the-cost-of-living-crisis">my research</a>, with James Meadway of the Progressive Economy Forum and Doug Nicholls of the General Federation of Trade Unions, looks at how UK price rises are more likely to have been caused by high profits, falling wages and weak production over decades.</p>
<h2>Pay negotiations</h2>
<p>In the mid-to-late 1970s, trade unions were able to negotiate wages through nationally organised systems of collective bargaining. This is where groups of employees, typically represented by a union, discuss wages and conditions with their employer. The gap between the wealth of business and labour at that time was significantly less, and Britain was a <a href="https://researchbriefings.files.parliament.uk/documents/CBP-7484/CBP-7484.pdf">more equal society in terms of income</a>.</p>
<p>A concerted assault on collective bargaining since then has greatly weakened workers’ ability to defend the value of their wages, at least by keeping pace with inflation. At the same time, income inequality has soared and is <a href="https://researchbriefings.files.parliament.uk/documents/CBP-7484/CBP-7484.pdf">expected to reach a high by 2027</a>. <a href="https://www.bruegel.org/analysis/collective-bargaining-associated-lower-income-inequality">Research shows evidence</a> of an inverse relationship between the number of workers organised in trade unions and their ability to use collective bargaining, versus the wealth concentrated in the hands of the richest elite.</p>
<p>As workers today start to realise this, it might explain <a href="https://www.dailymail.co.uk/news/article-12115963/London-Underground-workers-vote-overwhelmingly-favour-strikes-RMT-union-announces.html">recent support for strike action</a> as unions try to maintain the value of wages in the face of persistent inflation.</p>
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Read more:
<a href="https://theconversation.com/recent-pay-rises-suggest-that-collective-bargaining-may-be-on-the-way-back-199436">Recent pay rises suggest that collective bargaining may be on the way back</a>
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<p>But it’s also important to be aware of the deeper, historic and strategic factors that have led to <a href="https://www.reuters.com/markets/currencies/dollar-hovers-near-2-month-high-debt-ceiling-angst-saps-risk-appetite-2023-05-24/">relatively high levels of inflation in Britain</a>. Addressing these issues will help get the UK out of the current cost of living crisis.</p>
<h2>A manufacturing powerhouse</h2>
<p>The first <a href="https://www.britannica.com/event/Industrial-Revolution">industrial revolution</a>, starting in the 18th century, made the UK a leading producer of manufactured products – the “<a href="https://www.encyclopedia.com/humanities/dictionaries-thesauruses-pictures-and-press-releases/workshop-world#:%7E:text=Workshop%20of%20the%20World%20informal,British%20manufacturing%20and%20industrial%20capacity.">workshop of the world</a>”. And it remained a major manufacturing power for more than a century, creating everything from cruise liners to <a href="https://www.computerweekly.com/feature/CW50-The-heyday-of-British-computing-How-the-Brits-ruled-IT">some of the first computer programs</a>.</p>
<p>But in the 1980s, Thatercherism undermined productive industry and skills development by shrinking entire sectors of the economy, such as <a href="https://www.theguardian.com/business/2016/mar/30/steel-in-the-uk-a-timeline-of-decline">steel-making</a>, <a href="https://www.researchgate.net/publication/308940455_Industrial_policy_and_the_British_automotive_industry_under_Margaret_Thatcher">car-making</a>, and <a href="https://www.history.co.uk/article/how-thatcher-broke-the-miners-strike-but-at-what-cost">coal production</a>. At the same time, the government <a href="https://www.investopedia.com/terms/b/bigbang.asp">loosened financial regulation</a> and removed controls on the flow of money out of the country, boosting the rule of finance.</p>
<p>This skewed the British economy away from its manufacturing heartlands, such as the Midlands, while inflating the political and economic power of banks and financial firms. Profits became less dependent on production.</p>
<p>Since 1960, British manufacturing has been in decline, both <a href="https://res.org.uk/mediabriefing/uk-industrial-performance-since-1960-does-the-failure-of-manufacturing-matter/">in terms of employment and output</a>, and in comparison to other similar countries. Low business investment over the decades has held the UK back versus the likes of the US, France and Germany, <a href="https://www.reuters.com/business/weak-investment-innovation-management-hamper-uk-productivity-2021-11-15/">leading to low productivity</a>.</p>
<p>This historic shock to the productive system of the UK meant that, when demand for goods grew post-COVID, there was little domestic capacity to produce them – so the country had to <a href="https://commonslibrary.parliament.uk/research-briefings/cbp-7851/">rely on imports to meet demand</a>. The costs of the most basic goods and services that we need – <a href="https://www.ons.gov.uk/economy/inflationandpriceindices/articles/costofliving/latestinsights">food, energy and housing</a> – have since soared. These essentials, which should be a relatively low proportion of our spending, have become unaffordable for millions of people. </p>
<p>Of course, price controls could help to reduce this inflation. But the underlying weaknesses that facilitate inflation in the long run should also be addressed. This will require a new UK industrial policy, together with plans for skills development for the workforce.</p>
<p>Curbs on the flow of business and money out of the country by banks, investment funds and large enterprises will help strengthen domestic investment. New approaches to public financing via organisations such as the central bank would also reduce the reliance on private banks. Rather than its remit being linked to profit and controlling inflation, for example, the Bank of England should focus on supporting investment by directing funds toward particular sectors, especially manufacturing.</p>
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<img alt="Bright blue sky behind Bank of England building with union flag flying." src="https://images.theconversation.com/files/527762/original/file-20230523-19-eaz6vt.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/527762/original/file-20230523-19-eaz6vt.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/527762/original/file-20230523-19-eaz6vt.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/527762/original/file-20230523-19-eaz6vt.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/527762/original/file-20230523-19-eaz6vt.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/527762/original/file-20230523-19-eaz6vt.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/527762/original/file-20230523-19-eaz6vt.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">The Bank of England.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/bank-england-your-travel-concept-704695771">aslysun/Shutterstock</a></span>
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<p>Britain’s extreme unleashing of market forces in the 1980s involved unprecedented privatisation and selling of public assets, wholesale deindustrialisation, and deregulation of the finance sector. During the years that followed, it included the systematic introduction of anti-union legislation and the dismantling of collective bargaining, leading to continuous downward pressure on wages as workers have less power to stand up to employers.</p>
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Read more:
<a href="https://theconversation.com/uk-strikes-how-margaret-thatcher-and-other-leaders-cut-trade-union-powers-over-centuries-186270">UK strikes: how Margaret Thatcher and other leaders cut trade union powers over centuries</a>
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<p>Corporate economic and political power was strengthened and, as a result, big businesses have been able to help themselves to extraordinary profits – often with <a href="https://pure.qub.ac.uk/en/publications/shortcomings-of-the-energy-oil-and-gas-profits-levy">additional government help</a>, including tax breaks and subsidies.</p>
<p>Unions have recently accused <a href="https://www.unitetheunion.org/media/5442/profiteering-across-the-economy-march-2023.pdf">big business of “profiteering”</a> amid this cost of living crisis, and some supermarkets have <a href="https://www.bbc.co.uk/news/business-65531197">started to cut prices</a> in response to this criticism.</p>
<p>But no amount of windfall taxes or <a href="https://www.gov.uk/government/publications/energy-bills-support/energy-bills-support-factsheet-8-september-2022">household subsidies</a> will stop the current profit binge at the expense of wages. Major structural change is needed. If this is not done, the current toxic mix of weak investment, low productivity and high inflation is likely to be disastrous for our country.</p><img src="https://counter.theconversation.com/content/204521/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Costas Lapavitsas does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>My research shows that UK price rises are likely to have been caused by high profits, falling wages and weak production over decadesCostas Lapavitsas, Professor of Economics, SOAS, University of LondonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2034022023-04-10T20:01:56Z2023-04-10T20:01:56ZStrikes, protests and collective action: how fighting a cost-of-living crisis wasn’t always about tightening your own belt<figure><img src="https://images.theconversation.com/files/519736/original/file-20230406-26-rakxhj.jpg?ixlib=rb-1.1.0&rect=8%2C8%2C5503%2C3693&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Striking public sector workers in London, 1979. </span> <span class="attribution"><span class="source">Getty Images</span></span></figcaption></figure><p>Most people today are coping with the rising cost of living individually: cost cutting, looking for a better paid job, taking on “side hustles”, and so on. But not so long ago, many workers globally and in Aotearoa New Zealand approached the same problem in far more collective ways.</p>
<p>From the late 1960s to the early 1980s – sometimes referred to as “the long 1970s” – the union movement used strikes to combat the effects on workers of chronic inflation and a deep economic crisis. These were often successful, both in Aotearoa and around the world.</p>
<p>In many ways, the long 1970s were similar to today, a <a href="https://www.taylorfrancis.com/books/mono/10.4324/9780429464133/global-1970s-duco-hellema">turbulent era</a> of wide-ranging transformation, social polarisation and economic decline. After the long post-war economic boom, the so-called “golden age” of capitalism came to a halt in the late 1960s. A long-term social and economic decline set in after the oil shocks of the 1970s.</p>
<p>Largely in response to this, strike levels reached <a href="https://www.google.co.nz/books/edition/Strikes_Around_the_World_1968_2005/YZ2ms23ZuVQC?hl=en&gbpv=1">historic peaks</a> in many countries. As British journalist <a href="https://www.goodreads.com/book/show/11399327-no-such-thing-as-society">Andy McSmith wrote</a> of the UK’s 1978-1979 “<a href="https://en.wikipedia.org/wiki/Winter_of_Discontent">winter of discontent</a>”, it was simply “irrational not to strike”, given how inflation was eroding pay packets. In Aotearoa New Zealand, for example, inflation averaged 11.5% in the 1970s and peaked at 17.2% in 1980.</p>
<p>Collective resistance wasn’t only organised in workplaces. There were also consumer campaigns such as the <a href="https://teara.govt.nz/en/biographies/5h42/humphries-florence-ann/print">Campaign Against Rising Prices</a> in the 1960s and 1970s, mostly organised by (unpaid) women domestic workers, and often supported by unions.</p>
<p>Many unions mobilised to obtain better pay – often because of workers’ demands over declining real incomes. Millions of workers around the world struck to keep their wages level with inflation, in many instances securing pay increases above inflation rates.</p>
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<img alt="" src="https://images.theconversation.com/files/519730/original/file-20230406-217-4mobwa.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/519730/original/file-20230406-217-4mobwa.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=420&fit=crop&dpr=1 600w, https://images.theconversation.com/files/519730/original/file-20230406-217-4mobwa.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=420&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/519730/original/file-20230406-217-4mobwa.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=420&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/519730/original/file-20230406-217-4mobwa.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=527&fit=crop&dpr=1 754w, https://images.theconversation.com/files/519730/original/file-20230406-217-4mobwa.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=527&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/519730/original/file-20230406-217-4mobwa.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=527&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Winter of discontent: striking British workers marching in London against the Labour government’s 5% limit for pay rises, 1979.</span>
<span class="attribution"><span class="source">Getty Images</span></span>
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<h2>Defending living standards</h2>
<p>In Aotearoa New Zealand, as <a href="https://openaccess.wgtn.ac.nz/articles/thesis/In_Defence_of_Living_Standards_The_Federation_of_Labour_and_the_politics_of_economic_crisis_1975-1987/20304423/1">historian Ross Webb has argued</a>, the Federation of Labour (FOL) adopted a largely successful strategy of “defending living standards” from the late 1960s to about 1984. They argued that employers and governments were trying to place the burden of the recession on workers and their families.</p>
<p>Union tactics were reasonably canny. They did not simply butt heads with employers set on reducing costs, or governments intent on restricting wage increases through <a href="https://www.britannica.com/money/incomes-policy">incomes policies</a>.</p>
<p>Instead, they contested the assumption of employers and politicians that inflation was mainly caused by wage increases (<a href="https://www.investopedia.com/terms/w/wage-price-spiral.asp">the wage-price spiral</a>), rather than a result of companies raising prices, profiteering and passing on the cost of the oil shocks.</p>
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Read more:
<a href="https://theconversation.com/inflation-is-raising-prices-and-reducing-real-wages-what-should-be-done-to-support-nzs-low-income-households-175915">Inflation is raising prices and reducing real wages – what should be done to support NZ’s low-income households?</a>
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<p>There were two tactics in particular that don’t seem to exist in Aotearoa today. The first was targeting stoppages against a particular employer. Once a breakthrough was achieved at one workplace, unions would ensure the gain was made into a broader industry, regional or national standard. Targeted strikes were not as costly or as risky as national or industry-wide strikes, with striking workers supported through weekly union levies.</p>
<p>The second tactic involved broad, nationally-coordinated, cross-union mobilisations. These included general strikes (either city-wide or national) and nationwide demonstrations. These solidarity actions generally focused on unsympathetic or intransigent governments intent on clamping wage increases.</p>
<p>When the Arbitration Court announced a <a href="https://teara.govt.nz/en/photograph/20501/general-wage-order-protest-meeting-1968">nil general wage order</a> in 1968 (meaning wages couldn’t rise), despite inflation running at about 5%, the FOL organised a limited campaign of targeted strikes against certain employers. Its Wellington Trades Council held a one-day, general, city-wide strike and a stormy <a href="https://www.academia.edu/7438476/June_26_1968_A_Riot_Outside_Parliament">protest outside parliament</a>.</p>
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<img alt="" src="https://images.theconversation.com/files/519735/original/file-20230406-18-thsjdq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/519735/original/file-20230406-18-thsjdq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=393&fit=crop&dpr=1 600w, https://images.theconversation.com/files/519735/original/file-20230406-18-thsjdq.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=393&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/519735/original/file-20230406-18-thsjdq.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=393&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/519735/original/file-20230406-18-thsjdq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=494&fit=crop&dpr=1 754w, https://images.theconversation.com/files/519735/original/file-20230406-18-thsjdq.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=494&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/519735/original/file-20230406-18-thsjdq.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=494&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Union foe: Robert Muldoon campaigning ahead of New Zealand’s 1975 election.</span>
<span class="attribution"><span class="source">Getty Images</span></span>
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<h2>General strikes and export bans</h2>
<p>Targeted stoppages were often highly effective, especially in strategic industries where profits and production could be quickly halted. For example, meatworkers <a href="https://www.academia.edu/39712443/Revisting_the_global_and_local_upheavals_of_1968">banned all meat exports to counter the nil wage order</a>. This was the country’s biggest export at the time, accounting for 40% of export revenue.</p>
<p>The export ban, together with many other stoppages, quickly brought results. Workers were granted a 5% increase nationally, just two months after the nil order was announced.</p>
<p>In 1979-1980, a union campaign successfully saw the repeal of the 1979 Remuneration Act, imposed by Robert Muldoon’s authoritarian populist-right government and which enabled the state to unilaterally lower negotiated wage increases between employers and unions.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/strikes-how-rising-household-debt-could-slow-industrial-action-this-year-198466">Strikes: how rising household debt could slow industrial action this year</a>
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</em>
</p>
<hr>
<p>The campaign involved a <a href="https://nzetc.victoria.ac.nz/tm/scholarly/tei-Salient42Spec1979.html">one-day national general strike in 1979</a>. Some 340,000 to 400,000 workers (<a href="https://www.academia.edu/29794227/Merging_politics_with_economics_Non_industrial_and_political_work_stoppage_statistics_in_New_Zealand_during_the_long_1970s">75-80% of the FOL’s membership</a>) participated, according to reasonably reliable estimates. It was the most well-supported strike in local history, followed in 1980 by a successful three-month strike by <a href="https://www.youtube.com/watch?v=Xl9GPhvumb8">paper mill workers</a> at Kinleith that gained substantial national support.</p>
<figure class="align-right ">
<img alt="" src="https://images.theconversation.com/files/519737/original/file-20230406-22-zctnfl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/519737/original/file-20230406-22-zctnfl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=903&fit=crop&dpr=1 600w, https://images.theconversation.com/files/519737/original/file-20230406-22-zctnfl.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=903&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/519737/original/file-20230406-22-zctnfl.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=903&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/519737/original/file-20230406-22-zctnfl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1135&fit=crop&dpr=1 754w, https://images.theconversation.com/files/519737/original/file-20230406-22-zctnfl.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1135&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/519737/original/file-20230406-22-zctnfl.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1135&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">New Zealand’s general strike, September 1979.</span>
<span class="attribution"><span class="source">PSA Journal</span></span>
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</figure>
<p>The final nail in the coffin for the Remuneration Act was the living standards campaign organised by the FOL and the Combined State Unions in 1980. Large protest marches were held around the country, including one that attracted up to 45,000 people during a three-hour, city-wide stop-work action in Auckland. </p>
<p>There were also <a href="https://www.academia.edu/39770030/Indigeneity_Dissent_and_Solidarity_Maori_and_Strikes_in_the_Meat_Industry_in_Aotearoa_New_Zealand_During_the_Long_1970s">smaller shop-floor strikes</a> aimed at achieving localised pay agreements to keep up with inflation. These often resulted in piecework or bonus payment schemes, or allowances for clothes, boots and working in dirty or dangerous condition. They all helped enormously with take-home pay.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/debate-the-forward-march-of-labour-restarts-with-historic-strikes-in-france-and-the-uk-201229">Debate: The forward march of labour restarts with historic strikes in France and the UK</a>
</strong>
</em>
</p>
<hr>
<h2>Disputed strategies</h2>
<p>These actions drew strong reactions from employers, the state, and from some sections of the community. Conservatives – such as those who took part in the <a href="https://teara.govt.nz/en/speech/21117/kiwis-care-march">“Kiwis Care” march</a> in 1981 – claimed strikers were greedy, disruptive, destroying the “national interest” and holding the country to ransom. Yet the law-and-order measures employed to contain or repress strikes usually just inflamed unrest.</p>
<p>A more effective response came in the form of <a href="https://www.academia.edu/62047527/Resistance_to_destructuring_in_the_1980s">economic restructuring and de-industrialisation</a> in the 1980s. Neoliberals argued strikes squeezed profits and production, and restricted management’s “right to manage” the factory and office floor. Employers and politicians used various tactics, such as factory closures, to successfully break unions and undermine workers’ power.</p>
<p>While inflation was tamed in Aotearoa by the early 1990s, it came at the expense of dramatically increased class inequality.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/recent-pay-rises-suggest-that-collective-bargaining-may-be-on-the-way-back-199436">Recent pay rises suggest that collective bargaining may be on the way back</a>
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<p>Worker resistance to the cost-of-living crisis in the long 1970s is still a polarising and contested subject. Probably the dominant view, voiced by the neoliberal right as well as some on the moderate left, is that <a href="https://www.stuff.co.nz/nelson-mail/opinion/10327735/Unions-paying-for-militancy-of-past">workers caused their own demise</a> by striking too much.</p>
<p>Some argued that unions had adopted an “immature” <a href="http://web.archive.org/web/20180215024437/http:/www.noted.co.nz/currently/profiles/union-leader-erin-polaczuk-opens-up-about-the-future-of-the-movement/">conflict-based strategy</a> that could never win, and that neoliberal restructuring was the inevitable response and outcome. Such a view tends to demonise the strike-prone 1970s as the “<a href="http://werewolf.co.nz/2018/02/our-union-powered-past/">bad old days</a>” when supposedly thuggish “unions ran the country”.</p>
<p>But it’s overly simplistic to blame workers for simply trying to keep their pay up with inflation after negotiation strategies failed. Those on the activist wing of unions would counter by arguing <a href="https://uncpress.org/book/9781469654775/knocking-on-labors-door/">workers fought back</a> <em>en masse</em> in the long 1970s to defend living standards. But they were simply defeated in the 1980s by more powerful global and local forces.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/519732/original/file-20230406-24-is0hgi.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/519732/original/file-20230406-24-is0hgi.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/519732/original/file-20230406-24-is0hgi.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/519732/original/file-20230406-24-is0hgi.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/519732/original/file-20230406-24-is0hgi.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/519732/original/file-20230406-24-is0hgi.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/519732/original/file-20230406-24-is0hgi.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">France has seen huge protests against proposed pension reform in early 2023.</span>
<span class="attribution"><span class="source">Getty Images</span></span>
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</figure>
<h2>The diminished collective</h2>
<p>Globally, strikes are perhaps back in vogue. In early 2023, there have already been a “mega-strike” in Germany, a “<a href="https://novaramedia.com/2023/01/31/everything-you-need-to-know-about-the-uks-biggest-strike-day-in-a-decade/">protect the right to strike</a>” action in the UK, and mass strikes against the raising of the pension age in France. In Aotearoa, teacher unions have mounted a rare coordinated strike. As economic problems deepen, it’s likely more will occur.</p>
<p>So far, however, these strikes against the cost-of-living crisis have not been as large or as widely supported as those of the long 1970s. In high-income countries, strike levels today are generally nowhere near the peaks of that period.</p>
<p>This is, of course, directly related to the astonishing decline of union membership since the 1970s. As a proportion of the whole workforce, union membership in Aotearoa has fallen from a peak of 57.5% in 1979 to 17% in 2021. Strikes are therefore limited to a minority of the workforce, especially in the underfunded public sector.</p>
<p>Little wonder, then, that most people these days are coping with soaring costs by taking individual rather than collective action. It’s also one of many reasons why so many feel powerless to effect deeper and lasting change.</p><img src="https://counter.theconversation.com/content/203402/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Toby Boraman receives funding from the Royal Society of New Zealand Marsden Fund. He is a member of the Tertiary Education Union. </span></em></p>From the late 1960s to the early 1980s, more unionised workforces from Europe to Aotearoa New Zealand fought hard to keep wages abreast with inflation. But it’s unlikely that could happen now.Toby Boraman, Lecturer in Politics, Massey UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2023072023-03-22T20:03:05Z2023-03-22T20:03:05ZFederal Reserve bows to bank-crisis fears with quarter-point rate hike, letting up a little in its fight against inflation<figure><img src="https://images.theconversation.com/files/517049/original/file-20230322-2102-14dfck.jpg?ixlib=rb-1.1.0&rect=35%2C78%2C5807%2C3810&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Fed chair Jerome Powell opted for a cautious approach on rates.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/federal-reserve-board-chairman-jerome-powell-holds-a-news-news-photo/1475351298?adppopup=true">Alex Wong/Getty Images</a></span></figcaption></figure><p><em>The Federal Reserve <a href="https://www.federalreserve.gov/newsevents/pressreleases/monetary20230322a.htm">raised interest rates by a quarter-point</a> on March 22, 2023, bowing to market expectations that it would temper its aggressive program of rate hikes amid a still-brewing banking crisis.</em></p>
<p><em>The U.S. central bank lifted rates to a range of 4.75% to 5%, <a href="https://www.federalreserve.gov/monetarypolicy/openmarket.htm">its ninth-straight increase</a> since March 2022. As late as early March 2023, it appeared that the Fed was planning to resume last year’s full-throttle rate-hiking campaign after slowing down in February. But the <a href="https://theconversation.com/silicon-valley-bank-biggest-us-lender-to-fail-since-2008-financial-crisis-a-finance-expert-explains-the-impact-201626">collapse of Silicon Valley Bank</a> on March 10 forced the central bank to take a step back.</em></p>
<p><em>So what does the Fed’s announcement tell us about where monetary policymakers think the economy – and inflation – are heading? A team of economists and finance scholars have weighed in to help make sense of it all.</em></p>
<h2>Rate hike shows Fed confident in banking sector</h2>
<p><strong>Jeffery S. Bredthauer, University of Nebraska Omaha</strong></p>
<p>This muted rate hike signals that the Fed is being cautious in order to steady the financial sector, which has been struggling since the collapse of <a href="https://www.cnbc.com/2023/03/21/svb-collapse-was-lehman-moment-for-technology-goldman-sachs.html">Silicon Valley Bank</a> on March 10, 2023. But the fact that the Fed raised rates at all acknowledges that the fight against inflation will need to continue.</p>
<p>While still an increase, it’s more of a pause, in my view, because until the recent banking turmoil, the central bank <a href="https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html">was expected to lift rates by a half-point</a>. Inflation has <a href="https://www.bls.gov/news.release/cpi.nr0.htm">remained stubbornly elevated</a> even though the Fed had jacked up rates 4.5 percentage points before the latest hike, and Chair Jerome Powell <a href="https://www.wsj.com/articles/jerome-powell-to-testify-to-congress-on-outlook-for-rates-inflation-e4e7f1e3">made it clear in congressional testimony</a> that he was intent on subduing the rise in prices.</p>
<p>But the aggressive rate rises <a href="https://theconversation.com/why-svb-and-signature-bank-failed-so-fast-and-the-us-banking-crisis-isnt-over-yet-201737">left some regional banks like Silicon Valley Bank</a> vulnerable because they <a href="https://www.fdic.gov/news/speeches/2023/spmar0623.html">drove down the value</a> of tens of billions in assets they held. Silicon Valley failed because it didn’t have enough assets to meet withdrawals. </p>
<figure class="align-center ">
<img alt="Bikes locked to a bike rack in front of a building with SVB on the front" src="https://images.theconversation.com/files/517053/original/file-20230322-14-ds17vb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/517053/original/file-20230322-14-ds17vb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/517053/original/file-20230322-14-ds17vb.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/517053/original/file-20230322-14-ds17vb.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/517053/original/file-20230322-14-ds17vb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/517053/original/file-20230322-14-ds17vb.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/517053/original/file-20230322-14-ds17vb.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">SVB, the proverbial stick in the spokes to Fed plans.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/the-svb-private-logo-is-displayed-on-an-atm-outside-of-a-news-photo/1248916426?adppopup=true">Patrick T. Fallon/AFP via Getty Images</a></span>
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</figure>
<p>While the Fed and other regulators <a href="https://www.washingtonpost.com/business/2023/03/13/what-the-us-is-doing-to-avert-a-bank-crisis-and-why-quicktake/0d5f9752-c16c-11ed-82a7-6a87555c1878_story.html">have acted to shore up</a> the system by backstopping depositors and smaller financial institutions, the concern now is that there may be more banks in a similar predicament. The smaller rate hike should help ease some of these concerns.</p>
<p>Yet, the inflation battle must go on, and the Fed recognizes that <a href="https://www.reuters.com/markets/us/us-consumer-spending-surges-january-inflation-accelerates-2023-02-24/">strong demand continues to prop up</a> consumer prices, particularly in the service sector. As such, I believe the Fed news shows that it has confidence in the banking system by continuing its interest rate hikes, albeit at a slower pace than had previously been expected.</p>
<p>And this is important. The greatest fear would be that spooked customers might irrationally start withdrawing money from banks because they fear a financial collapse – the classic bank run. That will not happen as long as there is faith in the banking system.</p>
<h2>Drop in inflation gave Fed breathing room to ‘pause’</h2>
<p><strong>Joerg Bibow and Marketa Wolfe, Skidmore College</strong></p>
<p>The Fed had two courses of action available when it came to setting rates. The first would have seen it continue aggressively raising rates, ignoring financial stability concerns – perhaps even seeing the hiking campaign as a sort of bloodletting that would squeeze inflation out of the economy. The second way forward would be to take a beat and see how the <a href="https://apnews.com/article/silicon-valley-bank-bailout-yellen-deposits-failure-94f2185742981daf337c4691bbb9ec1e">ongoing fragility in the banking sector</a> plays out first. </p>
<p>Fortunately – in our view – the Fed did not choose the former.</p>
<p>While falling short of a total pause in raising interest rates – <a href="https://www.wsj.com/articles/u-n-calls-on-fed-other-central-banks-to-halt-interest-rate-increases-11664809202">an option some market watchers had been calling for</a> – the latest hike represents a substantial slowdown from the Fed’s previous plans, and therefore demonstrates the Fed’s caution in the face of a nascent banking situation. </p>
<p>It was able to do this in large part because there are clear signs inflation has come down.</p>
<p>As measured by the <a href="https://www.bea.gov/data/personal-consumption-expenditures-price-index">Personal Consumption Expenditure Price Index</a> – the <a href="https://www.stlouisfed.org/publications/regional-economist/july-2013/cpi-vs-pce-inflation--choosing-a-standard-measure">Fed’s preferred measure</a> – inflation has declined from a <a href="https://fred.stlouisfed.org/series/PCEPI">40-year high of 7%</a> in June 2022 to 5.4% in January 2023. </p>
<p>And the <a href="https://www.frbsf.org/economic-research/publications/economic-letter/2022/june/how-much-do-supply-and-demand-drive-inflation/">main cause of the recent surge in inflation</a> - COVID-19 supply chain disruptions – has eased. In addition, an upward wage-price spiral has not developed.</p>
<p>Furthermore, the banking turmoil might have already delivered an <a href="https://www.nytimes.com/2023/03/22/business/banking-crisis-interest-rates-lending.html">equivalent of another interest rate hike</a> in terms of its impact on the economy.</p>
<p>Although inflation remains high by historical standards, the risk it will reaccelerate seems low. Altogether, this allowed the Fed to take a breath and deal with what’s going on in the banking sector.</p>
<p>Put another way, the Fed decided, with so much uncertainty about the impact the recent turmoil will have on the economy, the risk of causing more damage was greater than the risk of inflation. </p>
<h2>Interest rates may peak soon</h2>
<p><strong>Arabinda Basistha, West Virginia University</strong></p>
<p>A big question on Fed watchers’ minds has been <a href="https://www.bankrate.com/banking/federal-reserve/when-will-the-fed-stop-raising-rates/">when will the central bank</a> stop raising rates or when will it settle on a “terminal” rate – that is, the level that monetary policymakers believe will ensure prices are stable.</p>
<p>That point may be just around the corner.</p>
<p>In September 2022, <a href="https://www.federalreserve.gov/mediacenter/files/FOMCpresconf20220921.pdf">Powell said the Fed</a> was trying to get to “a place where real rates are positive across the yield curve.” </p>
<p>Real interest rates are a measure of the real, inflation-adjusted cost of borrowing, which is calculated by subtracting expected inflation rates from nominal interest rates. A yield curve shows yields for bonds of different maturities.</p>
<p>Back in September, part of the yield curve was negative, meaning annual inflation was higher than the interest rates. Today, <a href="https://www.nytimes.com/2023/02/10/business/interest-rates-inflation-economy.html">more of the curve</a> has turned positive, which means the Fed is closer to Powell’s goal.</p>
<p>Moreover, Powell <a href="https://www.federalreserve.gov/mediacenter/files/FOMCpresconf20230201.pdf">switched from declaring</a> that “ongoing” rate rate hikes “will” be needed to the softer <a href="https://www.federalreserve.gov/mediacenter/files/FOMCpresconf20230322.pdf">“some additional” increases “may be appropriate</a>,” which suggests it sees the light at the end of the interest rate tunnel. Powell also acknowledged that the banking sector stress can work in a way similar to an interest rate hike by reducing inflationary pressures via lower business activity.</p>
<p>Overall, it seems that the Fed is much closer to its policy destination with one or two moderate interest rates increases left in this year, if inflation risks evolve according to expectations. I see a pause in interest rates as early as fall when they settle at a terminal rate <a href="https://www.federalreserve.gov/newsevents/pressreleases/monetary20230322a.htm">of around 5.5%</a>.</p><img src="https://counter.theconversation.com/content/202307/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The Fed raised rates by a quarter-point – less aggressive than had been expected before the current banking crisis, but signaling inflation is still its focus.Jeffery S. Bredthauer, Associate Professor Of Finance, Banking and Real Estate, University of Nebraska OmahaArabinda Basistha, Associate Professor of Economics, West Virginia UniversityJoerg Bibow, Professor of Economics, Skidmore CollegeMarketa Wolfe, Associate Professor of Economics, Skidmore CollegeLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2015252023-03-10T18:01:35Z2023-03-10T18:01:35ZThe people who care for and educate our children deserve better pay - here’s why that would help us all<figure><img src="https://images.theconversation.com/files/514671/original/file-20230310-1045-azqmmv.jpg?ixlib=rb-1.1.0&rect=75%2C91%2C5401%2C3567&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/group-small-nursery-school-children-man-2025581696">Ground Picture/Shutterstock</a></span></figcaption></figure><p>Pressure on working parents has been building for a long time, with daycare costs increasing as places become more scarce. <a href="https://www.theguardian.com/money/2023/mar/08/some-parents-england-spending-80-per-cent-pay-childcare-study">Two recent reports</a> clearly illustrate the dysfunctional nature of England’s system of Early Childhood Education and Care (ECEC).</p>
<p>The reports from <a href="https://www.coram.org.uk/news/coram-survey-finds-childcare-shortages-nationwide-most-disadvantaged-children-missing-out">children’s charity Coram</a> and <a href="https://www.nesta.org.uk/data-visualisation-and-interactive/the-cost-of-childcare-where-are-englands-affordability-blackspots/">thinktank Nesta</a> highlight the declining availability and affordability of childcare places across England. This creates “poverty traps” for both parents and early years workers who are struggling to get by as the cost of living keeps climbing. </p>
<p>We are conducting <a href="https://www.emerald.com/insight/content/doi/10.1108/ER-01-2022-0042/full/html">ongoing research</a> into what <a href="https://decentworkcity.manchester.ac.uk/">decent work</a> looks like in different parts of the world, and what policy measures make labour markets more inclusive and sustainable. Since 2020 we have spoken with a number of policy makers, early years care providers and working parents. All agree that more sustained investment would support parents who want to work, while also helping create decent jobs within the ECEC industry.</p>
<p>High costs and patchy coverage have created a childcare crisis – and these problems are more acute in <a href="https://www.cypnow.co.uk/news/article/parents-in-deprived-areas-struggling-with-childcare">deprived areas</a>. The average cost of a full-time place for pre-school children across the UK is £14,836, according to Coram’s report. This is more than 80% of the 2022 full-time annual minimum wage of £18,500. Unsurprisingly, the UK often comes near the bottom of international <a href="https://data.oecd.org/benwage/net-childcare-costs.htm">league tables for childcare affordability</a>. And within England, Manchester has some of the <a href="https://www.nesta.org.uk/data-visualisation-and-interactive/the-cost-of-childcare-where-are-englands-affordability-blackspots/">least affordable childcare</a> compared to average earnings. </p>
<p>Despite significant <a href="https://www.hrmagazine.co.uk/content/comment/tackling-labour-market-friction-after-covid-19-a-time-for-transformational-thinking">financial and social pressures</a> on unemployed and inactive workers to move back into the labour market, evidence gathered by <a href="https://www.bbc.co.uk/news/uk-england-gloucestershire-62179825">the BBC</a> suggests that parents are effectively being priced out of full-time work by this childcare affordability crisis.</p>
<p>The free 30 hours per week provision for 3- and 4-year-old children (and some 2-year-olds from low-income families) is welcome. But free hours are only available during term time (38 weeks per year) and parents in England (but not Scotland) must both be working at least 16 hours per week to qualify. Our focus groups with working mothers have highlighted that in order to keep a job and build a career, there is also a need for affordable wraparound and holiday care.</p>
<h2>Investing in childcare</h2>
<p>The perverse outcomes of this expensive model are made worse by the fact that many providers cannot pay their staff enough to live on. Our ongoing research suggests that ECEC workers are often mothers themselves (also in need of affordable childcare), and many earn at or just above the adult minimum wage of £9.50 per hour (due to rise to £10.42 in April 2023) regardless of their experience and skills. </p>
<p>While the overall early years <a href="https://epi.org.uk/wp-content/uploads/2019/01/The-early-years-workforce-in-England_EPI.pdf">workforce is ageing</a>, new entrants to the sector may be paid at the “<a href="https://www.gov.uk/national-minimum-wage-rates">youth rates</a>” of £9.18 (21- and 22-year-olds) or £6.83 (18- to 20-year-olds). This meant <a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/906906/The_stability_of_the_early_years_workforce_in_England.pdf">the average wage within the sector was £7.43</a> in 2020, well below the adult minimum wage at the time (£8.21). </p>
<p>Workers clearly do not join the early years sector for the money, but amid an unprecedented <a href="https://theconversation.com/global-economy-2023-how-countries-around-the-world-are-tackling-the-cost-of-living-crisis-196740">cost of living crisis</a> these wages fall far short of <a href="https://www.routledge.com/The-Living-Wage-Advancing-a-Global-Movement/Dobbins-Prowse/p/book/9780367514877">what is needed to survive</a>.</p>
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<img alt="Group Of Workers With Babies In Nursery" src="https://images.theconversation.com/files/514672/original/file-20230310-16-tchzlt.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/514672/original/file-20230310-16-tchzlt.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/514672/original/file-20230310-16-tchzlt.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/514672/original/file-20230310-16-tchzlt.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/514672/original/file-20230310-16-tchzlt.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/514672/original/file-20230310-16-tchzlt.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/514672/original/file-20230310-16-tchzlt.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Many providers can’t afford to pay their employees competitive wages, creating industry-wide problems with recruitment and retention.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/group-workers-babies-nursery-341582597">SpeedKingz/Shutterstock</a></span>
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<p>Many ECEC providers have told us that they cannot compete for staff with other essential services such as schools and the NHS, where starting salaries, career progression and pensions are often better. Since COVID-19, providers also struggle to compete with supermarkets, many of whom pay at least the real living wage and offer part-time, flexible work that has fewer physical and emotional demands. Our research also indicates that some potential early years educators estimate that they would be financially better off staying on Universal Credit.</p>
<p>All of this leaves providers running at less than full capacity, which further reduces the number of places on offer to parents. This only makes it harder for early years providers to <a href="https://childcare-during-covid.org/wp-content/uploads/2022/02/CDC-19-Final-report.pdf">keep their heads above water</a>.</p>
<p>But providers are unable to move towards paying staff the real living wage (currently £10.90 per hour outside of London) because the funding they receive from the government for 3- and 4-year-old Nursery Education Fund (NEF) places leaves many struggling to break even. This requires providers to cross-subsidise from other parts of the business or to charge additional <a href="https://www.bbc.co.uk/news/business-58242686">‘top-up’ fees for meals, nappies and activities</a>. </p>
<p>While some local authorities have increased funding and added <a href="https://journals.sagepub.com/doi/pdf/10.1177/10242589211028460">living wage clauses to contracts for home care</a>, rates for <a href="https://view.officeapps.live.com/op/view.aspx?src=https%3A%2F%2Fassets.publishing.service.gov.uk%2Fgovernment%2Fuploads%2Fsystem%2Fuploads%2Fattachment_data%2Ffile%2F1035964%2FEarly_years_funding_rates_and_step-by-step_calculation_for_2022_to_2023.xlsx&wdOrigin=BROWSELINK">NEF places across local authority areas</a> typically do not cover the costs of higher wages.</p>
<h2>Better support for the industry</h2>
<p><a href="https://www.fawcettsociety.org.uk/Handlers/Download.ashx?IDMF=88773740-12ac-40d8-9921-217f3228363d">Research shows</a> that the subsidised model of childcare in Quebec, Canada, has steadily increased the labour market participation of mothers, while also strengthening the professional status of early years educators. Calls are growing for a similar scheme in the UK to expand subsidised childcare beyond the current 3- and 4-year-old offer, while at the same time improving working conditions within the industry. </p>
<p>Roles in ECEC can be highly rewarding and socially valuable but making the sector <a href="https://theconversation.com/underpaid-and-undervalued-the-reality-of-childcare-work-in-the-uk-87413">more attractive as an industry to work in</a> is crucial if the UK is to better support working parents. For women in particular, this could help address the <a href="https://www.standard.co.uk/business/business-news/uk-gender-pay-gap-widens-as-childcare-costs-worsen-motherhood-penalty-b1065198.html">gender pay gap</a> and the motherhood pay and career penalty.</p>
<p>While some additional support is expected to be announced in the Spring budget, the key role of childcare in tackling gender equality has also been set out in policy proposals by the <a href="https://labourlist.org/2023/03/our-focus-will-be-on-reform-bridget-phillipsons-speech-on-childcare/">Labour party</a>.</p>
<p>Until ECEC is seen as an essential public good in the UK, and is properly funded and adapted to parent’s needs, the unequal burden of high costs and low wages is likely to continue. A revaluation of jobs within ECEC would benefit both the hard-pressed parents and the low-paid workers who have a mutual interest in high-quality and sustainable childcare provision.</p><img src="https://counter.theconversation.com/content/201525/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Mathew Johnson receives funding from the UKRI/Medical Research Council; Grant number MR/T019433/1.</span></em></p><p class="fine-print"><em><span>Eva Herman receives funding from UKRI/Medical Research Council; Grant number MR/T019433/1. </span></em></p>Investment in UK childcare should go towards better pay and conditions for workers. This could also help increase availability and affordability for parents.Mathew Johnson, Senior Lecturer in Employment Studies, University of ManchesterEva Herman, Research Associate at the Work and Equalities Institute at Alliance Manchester Business School, University of ManchesterLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1994362023-03-01T11:02:41Z2023-03-01T11:02:41ZRecent pay rises suggest that collective bargaining may be on the way back<figure><img src="https://images.theconversation.com/files/512436/original/file-20230227-28-w04btt.jpg?ixlib=rb-1.1.0&rect=54%2C54%2C4429%2C2913&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Paramedics and ambulance staff striking for better pay in January 2023.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/bournemouth-uk-january-23-2023-striking-2259987759">Ajit Wick/Shutterstock</a></span></figcaption></figure><p>London bus drivers working for transport company Abellio recently <a href="https://news.sky.com/story/london-bus-drivers-end-strike-action-and-accept-18-abellio-pay-increase-12810243">negotiated an 18% pay rise</a> following industrial action organised by the trade union Unite. Such success shows the impact that collective bargaining can have on the pay negotiation process. Other unions that have <a href="https://inews.co.uk/news/politics/nurses-strike-paused-after-ministers-agree-to-pay-talks-2163958">recently paused industrial action</a> to return to the negotiating table will be hoping for similar levels of success</p>
<p><a href="https://www.tuc.org.uk/workplace-guidance/organising-and-bargaining/collective-bargaining">Collective bargaining</a> involves a group of employees – typically represented by a union – negotiating with an employer about wages and conditions. But the government’s use of pay review bodies (PRBs) since the 1970s to advise on public sector pay levels has created a wedge between employees and their employers – and ultimately the government – when it comes to discussing wages and conditions.</p>
<p>The current <a href="https://theconversation.com/winter-of-discontent-how-similar-is-todays-situation-195838">resurgence of industrial action</a> and questions about the credibility of PRBs could lead to a return to more traditional wage negotiations, however, in which unions engage in collective bargaining directly with employers. </p>
<p>Research shows that stronger unions and wider collective bargaining coverage not only improve fairness, they also <a href="https://www.emerald.com/insight/content/doi/10.1108/ER-09-2018-0256/full/html">help to rebalance the economy</a> away from debt-led growth to a stable and healthier model of economic growth. But in recent decades collective bargaining has been in decline. </p>
<p>In 1996 36% of employees’ pay and conditions were directly affected by an agreement between their employer and a trade union. By 2021 the <a href="https://www.gov.uk/government/collections/trade-union-statistics">figure was 26%</a>. The proportion of employees covered by these agreements in the public sector fell from 74% to 58% during this time and from 23% to 14% in the private sector. </p>
<p>This contraction in collective bargaining has led to a fall in how much of the national income is paid in wages and a rise in that paid to shareholders and companies in the form of profit, leading to greater income inequality. In the UK, <a href="https://www.emerald.com/insight/content/doi/10.1108/ER-09-2018-0256/full/html">this wage share fell</a> from 70.6% of national income in 1975 to 66.6% in 2018. This was accompanied by a 47 percentage point fall in collective bargaining coverage and at the same time union density (the number of trade union members as a percentage of the total number of UK employees) decreased by 21.1 percentage points.</p>
<h2>Union benefits</h2>
<p><a href="https://labordoc.ilo.org/discovery/fulldisplay?vid=41ILO_INST:41ILO_V1&tab=Everything&docid=alma993875643402676&context=L&adaptor=Local%20Search%20Engine&query=sub,exact,collective%20bargaining&sortby=date_d&mode=advanced&offset=40">Research shows</a> that high levels of bargaining coverage help make trade unions more effective. They enable unions to ensure equality in terms of income distribution and to hold successful wage negotiations, the results of which are shared by the wider workforce. Unions are likely to be more successful if they coordinate across both firms and entire industries.</p>
<p>But despite the overall fall in coverage, collective bargaining still sets pay for certain employees in some of the UK’s largest companies including <a href="https://www.hrmagazine.co.uk/content/news/rolls-royce-factory-workers-win-record-pay-increase">Rolls Royce</a>, <a href="https://www.cwu.org/press_release/new-bt-group-pay-agreement-reached-to-be-put-to-union-members/">BT Group</a> and <a href="https://www.personneltoday.com/hr/tesco-store-pay-usdaw/">Tesco</a>. It’s also used in rail, chemicals, oil refining and parts of the banking sector. The UK’s largest local labour market is <a href="https://www.heathrow.com/company/about-heathrow/heathrow-2-0-sustainability-strategy/community#:%7E:text=Heathrow%20currently%20employs%2076%2C000%20people,to%20work%20at%20the%20airport.">Heathrow, with 76,000 workers</a>, many of whom are unionised and collectively bargain to negotiate pay and conditions. </p>
<p>And there is a lot of evidence that organisational collective bargaining has firm benefits for workers in terms of pay, job quality, working hours and work-life balance. My <a href="https://doi.org/10.1108/ER-09-2018-0256">research includes details of cases</a> where collective bargaining has been restored by the firms themselves, suggesting that employers also recognise the benefits. Agreeing pay with unions helps reduce costs because terms and conditions of employment are standardised across the company.</p>
<h2>The role of pay review bodies</h2>
<p>Recent news of public sector worker strikes has been peppered with references to Pay Review Bodies (PRBs). Established in the UK in the 1970s – <a href="https://www.tandfonline.com/doi/abs/10.1111/1467-9302.00378">often in response to industrial action</a> – there are eight independent panels that provide the government with evidence, advice and recommendations on public sector pay and conditions. Separate PRBs cover industries including the armed forces, doctors dentists, nurses, teachers, and the senior salaries group in the civil service. </p>
<p>While technically defined in government statistics as collective bargaining, <a href="https://commonslibrary.parliament.uk/research-briefings/cbp-8037/">nearly half (45%) of public sector workers</a> have their pay and conditions determined by these bodies. </p>
<p>Yet, since the 2008 financial crisis, PRBs have presided over <a href="https://www.theguardian.com/business/2023/jan/17/real-terms-uk-pay-fell-fastest-20-years">a real terms fall in public sector earnings</a>, with some <a href="https://news.sky.com/story/nurses-are-working-the-equivalent-of-one-day-a-week-for-free-research-says-12731952">nurses’ pay declining by 20%</a> over the past decade. This dramatic drop, alongside spiralling inflation in 2022, provides the context for the current wave of industrial action. </p>
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Read more:
<a href="https://theconversation.com/strikes-why-refusing-public-sector-pay-rises-wont-help-reduce-inflation-198333">Strikes: why refusing public sector pay rises won't help reduce inflation</a>
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<p>This situation was driven by <a href="https://researchbriefings.files.parliament.uk/documents/CBP-8037/CBP-8037.pdf">government policies</a> dictating a two-year public sector pay freeze in 2010, followed by a 1% average pay cap on public sector pay awards, which was removed in 2017. Between 2018 and 2020 average pay awards were above 2%, but a further pay freeze (excluding NHS staff and workers earning below £24,000) was introduced in 2021. Such restrictions undermine PRB claims of independence. </p>
<p>Plus, the government sets guidelines for the PRBs on affordability, departmental spending plans and even inflation targets. These issues around PRB recommendations have been compounded by a failure to address the public sector staff shortages and retention issues that are also contributing to industrial action.</p>
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<img alt="Bournemouth, UK-February 07 2023: General secretary of the Royal College of Nursing, Pat Cullen visiting the picket line of striking nurses at Royal Bournemouth Hospital" src="https://images.theconversation.com/files/512435/original/file-20230227-775-kep09i.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/512435/original/file-20230227-775-kep09i.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=399&fit=crop&dpr=1 600w, https://images.theconversation.com/files/512435/original/file-20230227-775-kep09i.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=399&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/512435/original/file-20230227-775-kep09i.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=399&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/512435/original/file-20230227-775-kep09i.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=501&fit=crop&dpr=1 754w, https://images.theconversation.com/files/512435/original/file-20230227-775-kep09i.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=501&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/512435/original/file-20230227-775-kep09i.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=501&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">The general secretary of the Royal College of Nursing, Pat Cullen, being interviewed on a picket line of striking nurses at Royal Bournemouth Hospital, England.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/bournemouth-ukfebruary-07-2023-general-secretary-2263728691">Ajit Wick/Shutterstock</a></span>
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<p>The government has been accused by some commentators of <a href="https://www.theguardian.com/commentisfree/2022/dec/14/england-nhs-crisis-government-strikes-guardian-report#:%7E:text=In%20every%20interview%20ministers%20hide%20behind%20the%20sanctity%20of%20the%20%E2%80%9Cindependent%E2%80%9D%20pay%20review%20bodies%2C%20claiming%20they%20set%20public%20pay.">hiding behind the PRBs</a> in the current disputes. Alastair Hatchett, a visiting research fellow at the University of Greenwich and former head of pay research at Incomes Data Services (a private company that publishes information on pay bargaining and pay data), believes the independence of the PRB system <a href="https://www.theguardian.com/politics/2022/dec/18/ministers-can-and-must-give-nurses-a-fair-pay-rise">has been undermined</a> by a reliance on Treasury forecasts that have turned out to be incorrect. He said in December 2022 that the government should be “forced to reopen pay bargaining” for the public sector’s 2022 pay awards. </p>
<p>Some public sector unions have already started to question PRBs and are considering <a href="https://www.ft.com/content/0953587e-6a20-40d4-8459-d4d7a2aa4d27">withdrawing their participation</a> from the process. This could herald a return to more traditional pay setting in the public sector with unions engaging in collective bargaining directly with employers.</p>
<p><a href="https://onlinelibrary.wiley.com/doi/abs/10.1111/bjir.12188">Previous research</a> has found that when unions are more active, more people join. Indeed, reports suggest the National Education Union has <a href="https://www.thetimes.co.uk/article/teacher-strikes-parents-in-limbo-as-union-keeps-schools-in-the-dark-fcffqsmmk">added 40,000 members</a> since it balloted for its current strike action. So it’s not hard to believe that successful industrial action could boost union membership and confidence further. This could build pressure for stronger collective bargaining over pay and conditions, which in turn could help to tackle UK income inequality.</p><img src="https://counter.theconversation.com/content/199436/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Sian Moore does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Concerns about the credibility of pay review bodies could boost collective bargaining on worker pay.Sian Moore, Professor in Employment Relations and Human Resource Management, University of GreenwichLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2005022023-02-24T10:03:32Z2023-02-24T10:03:32ZThe UK’s four-day working week pilot was a success – here’s what should happen next<figure><img src="https://images.theconversation.com/files/512037/original/file-20230223-22-gwx647.jpg?ixlib=rb-1.1.0&rect=0%2C65%2C5450%2C2412&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Reconstructing the working week.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/printed-calendar-4-day-working-week-2026467593">Steve Heap/Shutterstock</a></span></figcaption></figure><p>The world’s largest <a href="https://www.cam.ac.uk/stories/fourdayweek">four-day working week trial</a> has just ended and almost all of the companies that participated have decided to continue with a <a href="https://autonomy.work/wp-content/uploads/2023/02/The-results-are-in-The-UKs-four-day-week-pilot.pdf">reduced working hours model</a>.</p>
<p>Participants in the trial agreed to produce the same output for the same pay, while reducing their hours to a four-day week. Revenues stayed largely the same across the 61 organisations (and 2,900 employees) that took part in the UK pilot, while employee wellbeing improved significantly, according to <a href="https://autonomy.work/wp-content/uploads/2023/02/The-results-are-in-The-UKs-four-day-week-pilot.pdf">a report on the scheme</a>. </p>
<p>Workers experienced less stress and burnout as a result of reduced anxiety and being able to juggle work, caring responsibilities and social commitments more easily, the results showed. There was also better job retention and a substantial reduction in sick days taken during the trial period from June to December 2022. </p>
<p>The results speak for themselves, as does the organisations’ continued commitment to this kind of working pattern. This is a resounding vote for a four-day work week – among these companies at least – but the end of the pilot should not signal the end of testing and tweaking this working model. </p>
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Read more:
<a href="https://theconversation.com/economics-of-a-four-day-working-week-research-shows-it-can-save-businesses-money-126701">Economics of a four-day working week: research shows it can save businesses money</a>
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</em>
</p>
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<p>A <a href="https://assets.henley.ac.uk/v3/fileUploads/Journalists-Regatta-2019-White-Paper-FINAL.pdf?_gl=1*gk9a22*_ga*MTMzOTU4NDg5NS4xNjY5Njk4MDc1*_ga_DNQYJ3TP6N*MTY3NzEzMjI3MC4xNS4wLjE2NzcxMzIyNzAuMC4wLjA.">2019 white paper</a> on the four-day working week published by a Henley Business School team led by Professor James Walker and Dr Rita Fontinha produced similar results. After surveying over 500 business leaders and 2,000 employees, including businesses that had already implemented a four-day working week, we also found that there is no “one-size-fits-all” solution to flexible working. Any shift to a shorter working week needs to be thoroughly planned by companies and their employees.</p>
<p>Each company involved in the recent UK four-day work week pilot programme designed a policy tailored to their particular industry, organisation, structure and work culture. And there are a range of different four-day week models to consider based on issues such as the way days off are chosen or how quickly the model is implemented. There are also many ways to measure changes in productivity levels – from sales turnover, speed of service, delivery of projects by target dates, to various assessments of customer and staff satisfaction. </p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/four-day-week-trial-confirms-working-less-increases-wellbeing-and-productivity-195660">Four-day week trial confirms working less increases wellbeing and productivity</a>
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</p>
<hr>
<p>Carefully planning the shift to a four-day week and providing specific training for managers and employees in advance is crucial to success. A poor implementation could result in problems including stress, unfairness (negatively affecting part-timers, for example), and ultimately, a lack of engagement around preserving productivity. To ensure the success of a four-day working week, input, feedback and commitment from employees at every company level is crucial.</p>
<p>So, other businesses that want to benefit from the advantages of a four-day working week should keep three longer-term considerations in mind. </p>
<h2>1. Maintaining productivity gains</h2>
<p>A four-day working week must be able to guarantee persistent productivity levels in the long term, when the shift becomes a permanent policy. There is a danger that once the novelty has worn off, and after employees have changed their contractual working pattern, they may be less motivated to produce the “25% boost” in productivity on the four days they do work. </p>
<p>After the success of the recent pilot, researchers and academics must now embark on a prolonged assessment of productivity changes. New businesses, and those involved in the first trial, will hopefully agree to continue supporting this research.</p>
<h2>2. Committing to a shorter working week</h2>
<p>It’s important to consider the impact of the current economic situation on working practices. High inflation has increased the costs of production for businesses and the cost of living for employees. On the one hand, this environment could erode employers’ focus on employee wellbeing. But it could also push employees to reduce their working week in their main job to try to make additional income elsewhere on the fifth day. This could defy the four-day working week purpose of higher productivity and wellbeing gains. </p>
<p>More broadly, in these challenging economic times, both employers’ and employees’ focus may shift from job improvement to job preservation (or even multiplication). Researchers and policymakers need to develop ways to support the braver businesses that decide to avoid job cuts and support more flexible working policies at this time. The macroeconomic situation will change and new working models should be planned with a long-term perspective.</p>
<figure class="align-center ">
<img alt="Woman meditating at desk, colleagues in the background, calm, yoga exercises, feeling zen, stress-free, corporate meditation, employee wellbeing." src="https://images.theconversation.com/files/512043/original/file-20230223-25-7axgqg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/512043/original/file-20230223-25-7axgqg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/512043/original/file-20230223-25-7axgqg.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/512043/original/file-20230223-25-7axgqg.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/512043/original/file-20230223-25-7axgqg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/512043/original/file-20230223-25-7axgqg.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/512043/original/file-20230223-25-7axgqg.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Improving employee wellbeing.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/mindful-millennial-african-woman-meditating-workplace-1076065424">fizkes/Shutterstock</a></span>
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</figure>
<h2>3. Assessing all flexible work options</h2>
<p>COVID lockdowns fuelled interest in various flexible work practices, as well as providing the opportunity to test some on a wider scale. Our research team wanted to understand whether opinions about the four-day working week changed because the pandemic presented other flexible models such as remote working. In November 2021, we launched a second round of surveys to find out if the four-day week been overshadowed.</p>
<p>The <a href="https://assets.henley.ac.uk/v3/fileUploads/Four-day-week-white-paper-FINAL.pdf">results showed</a> that the four-day working week was still the desired option out of the various flexible working arrangements available. Further, most people preferred to be able to choose the fifth day off (around 70%) or to take a Friday or Monday (61%). </p>
<p>After the four-day week, working full-time hours but being able to choose when to do them, and being able to work from home whenever needed, were the second most popular options (65% and 66% respectively). Working from home all the time was the least favourable option, but it gained a significant number of extra supporters after the pandemic, rising to 51% from 43% pre-COVID.</p>
<p>Our research also indicated that preferences change based on employee demographics. Women were significantly more likely to want alternative working options compared to men, for example. We also saw regional differences: people in north-east England, Scotland and Northern Ireland were most attracted to a four-day working week. Those in Greater London and the south-east preferred to work flexibly or from home as needed.</p>
<p>Business leaders need to understand the full picture of needs in their individual businesses to make flexible working a success. A balance must be struck between individual preferences and formal human resources policies and work processes. This will help to maintain productivity, alongside employee wellbeing, even as people work fewer hours for the same pay.</p><img src="https://counter.theconversation.com/content/200502/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Miriam Marra does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>A four-day week boosts productivity and employee wellbeing, but it should be carefully planned and tailored to individual company needs.Miriam Marra, Associate Professor of Finance and co-Director of Equity, Diversity, and Inclusion at Henley Business School, University of ReadingLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1994732023-02-22T17:17:02Z2023-02-22T17:17:02ZGender pay gap is bigger for some women than others – here’s how to work it out<figure><img src="https://images.theconversation.com/files/511472/original/file-20230221-28-ksesnz.jpg?ixlib=rb-1.1.0&rect=57%2C98%2C5406%2C3538&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/businesswoman-leads-meeting-around-table-shot-633365168">Monkey Business Images/Shutterstock</a></span></figcaption></figure><p>Women in the UK earn, on average, 14.9 pence less per pound than men, based on the latest data from the <a href="https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earningsandworkinghours/datasets/allemployeesashetable1">Office for National Statistics (ONS)</a>. This means that while men are getting paid from January 1, women have effectively worked for free for the first 53 days of the year. That makes February 23 <a href="https://www.tuc.org.uk/news/gender-pay-gap-means-women-work-free-nearly-two-months-year">“women’s pay day”</a>.</p>
<p>The ONS gender pay gap is calculated by dividing the median pay for women by the median for men. The resulting ratio tells us that women earn, on average, 85.1 pence to the male pound – or 14.9% less. </p>
<p>This covers employees doing all jobs. It’s not the same as men and women getting paid differently for doing the same job, which is illegal.</p>
<p>But calculating the gender pay gap in different ways can highlight the different causes of the gap and which groups of women are more or less affected.</p>
<p>The median is the middle amount when all wages are listed from smallest to highest. This is different from the mean, which you find by adding everyone’s wages together and dividing by the number of people. </p>
<p>The median is less distorted by top earners, <a href="https://www.sciencedirect.com/science/article/pii/S0927537117300878?via%3Dihub">who are mostly men</a>. If a survey of 1,000 people included Elon Musk while everyone else earned minimum wage, this would probably give an “average” wage of hundreds of pounds an hour based on the mean. The median would be the minimum wage.</p>
<p>The ONS figure of 14.9% is based on hourly pay, so <a href="https://www.stats.govt.nz/assets/Uploads/Methods/Measuring-the-gender-pay-gap/measuring-gender-pay-gap-corrected.pdf">compares pay for a fixed one-hour amount of work</a>. Comparing weekly or annual pay would give bigger gaps because they’re directly affected by the amount of work that people do. Women – on average – work fewer hours than men <a href="https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earningsandworkinghours/datasets/allemployeesashetable1">(29 v 35 weekly hours)</a>.</p>
<p>The ONS figure also excludes overtime and bonuses. But <a href="https://www.sciencedirect.com/science/article/pii/S0377221718304235?casa_token=ILR3L9wwJFgAAAAA:Xm9k4xtFRlNZ-SpTfAlNk9lEwueUYX5_DeDqoiyV-OswVMjBksLKwqNIRI9aVBOpSeQ_GYZ70w#bib0023">there is evidence</a> of larger gender pay gaps for bonuses than for regular pay.</p>
<p>Included in the ONS figure are part-time employees. Removing them narrows the gender pay gap to 8.3%. But this still puts women’s pay day for full-time employees on January 30, meaning full-time employed women effectively work nearly one month of the year for free.</p>
<p>The ONS figure also excludes self-employed people. <a href="https://www.ipse.co.uk/resource/women-in-self-employment.html">The Association of Independent Professionals and the Self-Employed</a> found a whopping self-employed gender pay gap of 43%. Self-employed women tend to charge less for their services than self-employed men. For this group, women’s pay day won’t come until June 6.</p>
<h2>What the gender pay gap doesn’t tell us</h2>
<p>Another pitfall of the overall gender pay gap is that it hides how the gap varies for lower versus higher earners.</p>
<p>A <a href="https://www.nuffieldfoundation.org/wp-content/uploads/2021/12/IFS-Inequality-Review-women-and-men-at-work.pdf">review</a> found that among the bottom 10% of UK earners, women were paid 90 pence on the male £1 in 2019, partly because of the wage floor created by the national minimum wage. For these women, pay day was February 6.</p>
<p>But among the top 10% of earners, women were paid 77 pence for every £1 paid to men, meaning their women’s pay day comes later, on March 25. American labour economist Claudia Goldin has described certain high-paid jobs, such as in banking, corporate management, law and consultancy, as <a href="https://www.economist.com/finance-and-economics/2021/11/06/do-greedy-jobs-cause-the-gender-pay-gap">“greedy jobs”</a> because the demands are incompatible with unpaid care and domestic work, <a href="https://wbg.org.uk/wp-content/uploads/2020/04/Accompanying-paper-FINAL.pdf">most of which is done by women</a>.</p>
<p>The overall gender pay gap masks differences by company and occupation, too. While in a <a href="https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earningsandworkinghours/bulletins/genderpaygapintheuk/2021">few occupations</a>, such as childminders and medical secretaries, women earn more than men on average, men typically make up a very small share in these jobs. These jobs also pay less on average.</p>
<figure class="align-center ">
<img alt="A woman helps a young girl with her schoolwork." src="https://images.theconversation.com/files/511481/original/file-20230221-16-vs3vrl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/511481/original/file-20230221-16-vs3vrl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/511481/original/file-20230221-16-vs3vrl.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/511481/original/file-20230221-16-vs3vrl.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/511481/original/file-20230221-16-vs3vrl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/511481/original/file-20230221-16-vs3vrl.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/511481/original/file-20230221-16-vs3vrl.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">In some careers, women actually make more than men on average – but these tend to be dominated by women.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/africanamerican-mom-mother-tutor-nanny-childminder-2120194271">Inside Creative House/Shutterstock</a></span>
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</figure>
<p>There are differences by parenthood and age as well. When women become mothers, their earnings stop rising so quickly or even fall. But when men become fathers, <a href="https://www.tuc.org.uk/sites/default/files/Pay_and_Parenthood_Touchstone_Extra_2016_LR.pdf">their earnings accelerate</a>. Women often have to cut back on employment after having children, sometimes because of <a href="https://www.theguardian.com/money/2021/sep/12/cost-insane-uk-parents-unable-afford-childcare">unaffordable childcare</a>, which stops them from advancing their careers and earnings. </p>
<p>Plus, <a href="https://www.jstor.org/stable/10.1086/511799">evidence</a> has shown that employers judge mothers as less competent and committed workers but fathers as “ideal workers”. By the time their first child is 12, UK women’s hourly wages are <a href="https://ifs.org.uk/sites/default/files/output_url_files/bn186.pdf">one-third below men’s</a>. For mothers, women’s pay day won’t come until May 2 2023.</p>
<p>The overall gender pay gap also ignores how gender intersects with other characteristics, like disability status, ethnicity and being a single parent. For example, white British women earn 18.7% less than white British men, while Bangladeshi women earn 23.1% less and Pakistani women 26.7% <a href="https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earningsandworkinghours/datasets/ethnicitypaygapreferencetables">less than white British men</a>.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/ethnicity-pay-gap-why-the-uk-needs-mandatory-reporting-160735">Ethnicity pay gap: Why the UK needs mandatory reporting</a>
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</p>
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<h2>Why we still need the pay gap measure</h2>
<p>Gender inequality is a complex concept, and the pay gap is only one measure. While the UK is an average performer internationally on its pay gap, it has a <a href="https://journals.sagepub.com/doi/10.1177/09589287221148336">bigger gender gap</a> in employment participation than many other advanced countries. </p>
<p>Focusing on pay also ignores non-wage benefits, like leave entitlements and enjoyment of one’s work. A 2021 study on labour and wellbeing <a href="http://eprints.lse.ac.uk/114354/1/dp1746.pdf">found that</a> including non-wage benefits in the definition of “pay” would widen the UK gender pay gap.</p>
<p>Despite its limitations, the gender pay gap is a straightforward summary measure for keeping track of gender equality. Still, calculating pay gaps for different groups and looking at other measures of gender inequality in the workplace, like employment rates and women’s access to workplace power, can help provide a fuller picture of what’s going on.</p><img src="https://counter.theconversation.com/content/199473/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Helen Kowalewska receives funding from the Economic and Social Research Council.</span></em></p>Summing up the gender pay gap in one number hides how inequality affects different groups of women.Helen Kowalewska, Lecturer in Social Policy, University of BathLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1992702023-02-16T11:33:51Z2023-02-16T11:33:51Z6,000 words but silent on falling real wages: what Chalmers got wrong on ‘values-based capitalism’ and fixing our economic woes<figure><img src="https://images.theconversation.com/files/510444/original/file-20230215-20-shxihw.png?ixlib=rb-1.1.0&rect=364%2C452%2C2397%2C1482&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Schwartz Media</span></span></figcaption></figure><p>Federal Treasurer Jim Chalmers’ recent essay in The Monthly, “<a href="https://www.themonthly.com.au/issue/2023/february/jim-chalmers/capitalism-after-crises#mtr">Capitalism after the crises</a>”, tells us a lot about economic predicament faced by the Albanese government and governments around the world. </p>
<p>Arguably, the reaction to the essay tells us even more.</p>
<p>The essay reflects two unpalatable facts. The first is that the model of capitalism that became dominant in the late 20th century – variously referred to as “neoliberalism”, “the Washington Consensus”, or in Australia as “economic rationalism” – has failed to meet the challenges of the 21st century, beginning with the global financial crisis of 2008. </p>
<p>The second is that no one, including our federal government, has a clear idea of what to do about it.</p>
<p>Rather than spelling out the economic failures in detail, Chalmers spends a fair bit of his essay talking about the “<a href="https://theconversation.com/polycrisis-may-be-a-buzzword-but-it-could-help-us-tackle-the-worlds-woes-195280">polycrisis</a>”: the overlapping onset of climate disaster, symbolised by the bushfires of 2019 and early 2020, with the COVID pandemic, energy shocks and the assault on global democracy. </p>
<p>However we decide to deal with these problems, Chalmers correctly observes that most of us don’t want to go back to pre-crisis “normal”.</p>
<h2>No mention of falling real wages</h2>
<p>For the average Australian, the most tangible manifestation of the failure of neoliberalism has been the stagnation of real wages. </p>
<p>In 2021, then Opposition Leader Anthony Albanese pointed out real wages had “<a href="https://www.abc.net.au/news/2021-06-29/anthony-albanese-fact-check-real-wages-scott-morrison-australia/100242448">flatlined</a>” in the eight years of Coalition government.</p>
<p>Chalmers mentions that the current government inherited “stagnant” real wages, but does not develop this point; indeed, “wages” are mentioned only four times in the essay. There’s no mention at all of the falling buying power of wages.</p>
<p>The reason, it may be assumed, is that real wages are now falling under Labor and are expected to keep falling until <a href="https://theconversation.com/higher-interest-rates-falling-home-prices-and-real-wages-but-no-recession-top-economists-forecasts-for-2023-198975">2024 at the earliest</a>. </p>
<p>The failure of wages to keep pace with inflation will more than wipe out the minimal gains in buying power achieved under the Coalition government, and also reverse some of those achieved under the previous Labor government. This failure isn’t confined to Australia. It is as bad or worse in the UK and the US. </p>
<p>The problem isn’t whether or not to recognise that wage stagnation is a problem. The problem is what to do about it. </p>
<h2>Silent on unions and bargaining power</h2>
<p>The <a href="https://www.bca.com.au/business_cautions_against_rushed_ir_changes">furious reactions</a> to Labor’s modest steps towards <a href="https://theconversation.com/zombie-wage-deals-have-hurt-australians-for-years-heres-how-new-industrial-relations-laws-could-finally-end-your-wage-pain-195534">multi-employer bargaining</a> are an indication of what would happen if the government tried to reverse the decades of anti-worker legislation, beginning in the late 1970s, which have driven wages down. </p>
<p>In his 6,000 words, Chalmers finds no room to mention “unions”. He refers once to “employers”, in the context of COVID jobs subsidies, while “workers” are mentioned only twice in passing.</p>
<p>The same is true of chronic problems of underfunding in education, health and aged care. Not only has Labor offered little or nothing in the way of increased funding, it has actually let programs inherited from the previous government – such as increased access to mental health consultations – expire when temporary funding ran out. </p>
<hr>
<p>
<em>
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Read more:
<a href="https://theconversation.com/stand-by-for-the-oddly-designed-stage-3-tax-cut-that-will-send-middle-earners-backwards-and-give-high-earners-thousands-182751">Stand by for the oddly designed Stage 3 tax cut that will send middle earners backwards and give high earners thousands</a>
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<p>The reason is straightforward. Labor went to the election promising to keep in place the lavish tax cuts for high-income Australians, due to hit wallets next year, as part of “<a href="https://theconversation.com/stand-by-for-the-oddly-designed-stage-3-tax-cut-that-will-send-middle-earners-backwards-and-give-high-earners-thousands-182751">Stage 3</a>” of the tax cuts leglislated by the Morrison and Turnbull governments.</p>
<p>In the lead-up to the Coalition’s October 2022 budget, Chalmers floated the idea of <a href="https://www.afr.com/politics/federal/labor-split-over-stage-three-tax-cuts-20221004-p5bmyp">scrapping or modifying the cuts</a>, and gathered considerable support. But the idea was <a href="https://www.afr.com/politics/federal/albanese-shut-down-tax-speculation-amid-backlash-fears-20221010-p5bokb">slapped down</a> by his leader Anthony Albanese.</p>
<p>Solely because of those tax cuts, Australia’s public-debt-to-GDP ratio is projected to climb. And, despite his denunciations of neoliberalism, Chalmers is fully committed to the neoliberal dogma that public debt is an <a href="https://ministers.treasury.gov.au/ministers/jim-chalmers-2022/transcripts/interview-peter-stefanovic-first-edition-sky-news-4">unsustainable burden</a>, even when interest rates are below the rate of inflation. </p>
<h2>Chalmers offers ‘values-based capitalism’</h2>
<p>Having ruled out both increased tax revenue and government debt as sources of finance, the government can do little to address Australia’s economic problems. And this brings us to the second part of Chalmers’ essay, on “values based capitalism”, which embodies the hope that we can pursue social goals with a combination of public initiative and private investment.</p>
<p>The explanation starts off reasonably well, with a focus on clean energy. </p>
<p>Given the reality of Australia’s largely privatised energy system, it is obvious that getting the right kinds of private investments is crucial. And with the most effective policy tool – a carbon price – ruled out, this necessarily entails a big role for bodies like the <a href="https://www.cefc.com.au/">Clean Energy Finance Corporation</a> and programs like <a href="https://www.energy.gov.au/news-media/news/rewiring-nation-supports-its-first-two-transmission-projects">Rewiring the Nation</a>, which provide public finance for transmission projects.</p>
<p>But things go downhill when Chalmers turns to “impact investing”. He says:</p>
<blockquote>
<p>across the social purpose economy, in areas such as aged care, education and disability, effective organisations with high-quality talent can offer decent returns and demonstrate a social dividend. </p>
</blockquote>
<p>Surely he is aware that aged care is a disaster area, the subject of a <a href="https://agedcare.royalcommission.gov.au/">Royal Commission</a>, even before its failings were brutally exposed by COVID. </p>
<p>As for education, the disaster of <a href="https://www.themandarin.com.au/74012-vet-scheme-audit/">VET-FEE Help</a>, in which private providers offered students inducements including free laptops to sign up for programs that loaded them with debt and provided little education, shows what can happen when investors want dividends, and aren’t too choosy about how they get them. </p>
<p>The market-based design of the <a href="https://www.ndis.gov.au/">National Disability Insurance Scheme</a> has also <a href="https://www.abc.net.au/news/2023-01-11/anglicare-tasmania-ndis-announcement-disability-services/101843438">proved problematic</a>, even if the NDIS is a big improvement on what went before.</p>
<h2>‘Place-based solutions’</h2>
<p>Then there’s the suggestion of “place-based” solutions. Chalmers says he can see in his own community in Logan, Queensland, that people who live on the outskirts of cities and in regional areas experience more inequality than others.</p>
<p>In the injustice he sees an opportunity: </p>
<blockquote>
<p>to focus our attention on place-based initiatives where communities have the genuine input, local leadership, resources and authority to define a new and better future, especially for kids.</p>
</blockquote>
<p>But this is getting things back to front. People who experience inequality live in the outskirts of cities because they can’t afford to live closer in. The median house price in Logan is about A$480,000. Go a few kilometres closer to the city, in suburbs like Underwood or Sunnybank, and it’s twice as much.</p>
<p>For all practical purposes, Brisbane is a single labour market. If people in Logan don’t have good jobs or good educational opportunities, it’s not because they live too far away; it’s because of structural inequalities in Australian society.</p>
<p>The way to help low-income families who live in Logan isn’t to fix Logan, it’s to increase their incomes. </p>
<p>Boosting incomes means boosting wages (that again), strengthening workers’ bargaining power, and making the tax-welfare system more progressive.</p>
<p>That’s not to say that there aren’t ways to improve life in low-income communities. Among the most cost-effective, if not the most glamorous, is improved bus services. </p>
<p>And there are doubtless a variety of initiatives that can benefit from local leadership. But most are best left to local and state governments. </p>
<p>The tools available to the national government are better suited to helping people than improving places.</p>
<h2>What we really need is more tax</h2>
<p>Overall, “values-based capitalism” can’t make more than a marginal contribution to fixing the problems left behind by the failure of neoliberalism. </p>
<p>The real solution is simple but politically unpalatable. We need governments to do more, commanding more resources, which necessarily entails the private sector commanding fewer. </p>
<p>This can only be achieved by increasing tax revenue, starting with <a href="https://www.stptax.com/top-10-tax-policies-of-the-australian-labour-party/">measures</a> like those put forward by Labor (unsuccessfully) in the 2019 election. </p>
<p>Unfortunately, the massive high-income tax cuts on their way with the support of Labor will make this difficult. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/humanising-capitalism-chalmers-new-version-of-an-old-labor-project-198763">Humanising capitalism: Chalmers new version of an old Labor project</a>
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<img src="https://counter.theconversation.com/content/199270/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>John Quiggin does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>For average Australians, the stagnation of real wages has been the most tangible manifestation of the failure of neoliberalism. Yet “wages” are only mentioned four times in Chalmers’ Monthly essay.John Quiggin, Professor, School of Economics, The University of QueenslandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1996872023-02-15T13:25:36Z2023-02-15T13:25:36ZIs it time for teachers to get a raise?<figure><img src="https://images.theconversation.com/files/509846/original/file-20230213-409-aiabw.jpg?ixlib=rb-1.1.0&rect=30%2C68%2C5081%2C3326&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Data shows teacher pay never exceeds that of other college graduates.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/photo/teacher-helping-student-with-school-work-royalty-free-image/104737311?phrase=teachers&adppopup=true">Blend Images - LWA/Dann Tardif via Getty Images</a></span></figcaption></figure><p><em>In his <a href="https://www.whitehouse.gov/briefing-room/speeches-remarks/2023/02/07/remarks-of-president-joe-biden-state-of-the-union-address-as-prepared-for-delivery/">2023 State of the Union address</a>, President Joe Biden <a href="https://dailycaller.com/2023/02/07/biden-calls-universal-pre-kindergarten-teacher-raises-in-state-of-the-union/">called for public school teachers to get a raise</a> but offered no specifics on how that could be done. Here, <a href="https://education.wayne.edu/profile/aa0901">Michael Addonizio</a>, an education policy expert at Wayne State University, provides insight on the current state of teacher salaries, whether a collective raise is in order and how one might be achieved.</em></p>
<h2>1. Do teachers really need a raise?</h2>
<p>In many school districts, the answer is: Yes. </p>
<p>According to a 2022 study from the Economic Policy Institute – a nonprofit, nonpartisan think tank that addresses low- and middle-income workers’ needs – the teacher “wage penalty” - that is, how much less teachers make than comparable workers - <a href="https://www.epi.org/publication/teacher-pay-penalty-2022/">grew from 6.1% in 1996 to 23.5% in 2021</a>. Put another way, the average weekly wages of public school teachers – adjusted for inflation – increased just US$29 from 1996 to 2021, from $1,319 to $1,348 in 2021 dollars. Meanwhile, inflation-adjusted weekly wages of other college graduates rose $445, from $1,564 to $2,009, over the same period.</p>
<p>Teacher <a href="https://www.epi.org/publication/teacher-pay-penalty-2022/">wage gaps vary widely</a> from state to state, but in no state does teacher pay equal or exceed pay for other college graduates.</p>
<p>Adding benefits to the analysis does not change the picture. Although teachers generally receive a higher share of their compensation as benefits than other professionals do – usually health insurance and retirement plans – this difference does not offset the teachers’ growing wage penalty. Teachers’ “total compensation” penalty reached 14.2% in 2021. This is a 23.5% wage penalty offset by a 9.3% benefits advantage. This total compensation penalty for teachers grew by 11.5 percentage points from 1993 to 2021, according to the Economic Policy Institute analysis.</p>
<p><iframe id="pAcKT" class="tc-infographic-datawrapper" src="https://datawrapper.dwcdn.net/pAcKT/1/" height="400px" width="100%" style="border: none" frameborder="0"></iframe></p>
<h2>2. Where do teacher raises typically come from?</h2>
<p>Public school teacher salaries are generally set by local school districts. Districts establish salary schedules where teacher base pay is determined by years of teaching experience and education credentials or graduate credit hours. Contracts are negotiated at the district level, so that teachers in different schools within a district are covered by the same salary schedule.</p>
<p>These schedules, sometimes referred to as “step-and-lane” systems, can vary substantially from district to district. District contracts may differ in the annual pay increases for experience or the relative importance given to experience versus credentials. Contracts may give larger annual pay hikes to less experienced teachers than to veteran teachers, or the reverse may be true.</p>
<p>Where does the money come from? Fully 93% of school districts’ operating revenue comes from <a href="https://www.pgpf.org/budget-basics/how-is-k-12-education-funded">state and local sources</a>. <a href="https://www.pgpf.org/budget-basics/how-is-k-12-education-funded">Nationally</a>, on average, states provide 47% and local districts provide 46%.</p>
<p><a href="https://www.ncsl.org/news/details/states-jump-start-efforts-to-boost-teacher-pay">Rising concern over low teacher salaries</a> has prompted many states to pass appropriations to boost local salary schedules across the board. In 2021, <a href="https://www.ncsl.org/news/details/states-jump-start-efforts-to-boost-teacher-pay">25 states</a> enacted or introduced legislation to raise teacher pay. Ten of those states have <a href="https://www.ncsl.org/news/details/states-jump-start-efforts-to-boost-teacher-pay">statewide teacher salary schedules</a>, while eight have minimum teacher salary requirements.</p>
<p>Among the states with statewide salary schedules, state initiatives raised pay and expanded eligibility for bonuses. In states with minimum salary requirements, lawmakers sought to raise these minimums and provide incentives for districts to hike salaries across the board. Elsewhere, state efforts focused on general salary increases for teachers.</p>
<p>However, despite these state efforts, teacher salaries continue to lag well behind other professional salaries in many states.</p>
<h2>3. Can federal funds be used?</h2>
<p>No, not as a long-term solution to the problem of low teacher pay. Federal funds are too limited in amount and there’s not enough flexibility to finance general pay raises for teachers.</p>
<p>The <a href="https://www.pgpf.org/budget-basics/how-is-k-12-education-funded">federal government provides about 7%</a> of K-12 revenue, and the money is designated for specific programs. In general, these funds are intended to supplement funding for schools with at-risk youth, including children with learning disabilities or children from low-income households. </p>
<p>During recent economic downturns – the Great Recession of 2008 and the 2020 COVID-19 lockdown – the federal government provided K-12 schools with emergency aid to supplement diminished state and local revenue. The COVID relief was exceptionally substantial, with the <a href="https://www.future-ed.org/with-an-influx-of-covid-relief-funds-states-spend-on-schools/">American Rescue Plan </a> providing school districts with $190 billion.</p>
<p>This federal aid, however, while unprecedented in amount, has two key limitations: it is one-time aid and not all districts share in it. Districts that do receive these funds must be careful not to make them part of their annual operating budgets without solid plans for state or local replacement funds. </p>
<p><a href="https://www.future-ed.org/educators-and-esser-how-pandemic-spending-in-reshaping-the-teaching-profession/?mc_cid=077b478eb5&mc_eid=494ed74b95">Many districts have revealed plans</a> to use these federal funds to hire new teachers or to pay teachers bonuses for extra work in an effort to mitigate COVID-related learning loss. Paying bonuses to current teachers would avoid the need to lay off teachers when the emergency aid runs out.</p>
<p>In addition, a revised <a href="https://www.congress.gov/bill/117th-congress/house-bill/9566?s=1&r=1">American Teacher Act</a> has been introduced in Congress. The bill would establish a four-year grant program for states to encourage local districts to raise base teacher salaries. The bulk of these funds would go to districts with teacher salaries below $60,000.</p>
<p>The bill would award grants to states that enact and enforce laws establishing a statewide minimum teacher salary requirement of $60,000. Details continue to be worked out, including refining the definition of a “teacher” to avoid paying unqualified staff with federal funds. The bill would address a pressing problem, but state participation would be voluntary and the program would expire in four years. And passage is uncertain. </p>
<p>To achieve lasting teacher pay hikes, it’s going to have to take place in state capitols and local school boards.</p><img src="https://counter.theconversation.com/content/199687/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michael Addonizio does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Teacher wages have risen little over the past few decades when adjusted for inflation.Michael Addonizio, Professor of Educational Leadership and Policy Studies, Wayne State UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1983332023-01-23T17:15:59Z2023-01-23T17:15:59ZStrikes: why refusing public sector pay rises won’t help reduce inflation<figure><img src="https://images.theconversation.com/files/505852/original/file-20230123-5193-463cw2.jpg?ixlib=rb-1.1.0&rect=19%2C16%2C962%2C645&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Nurses in England, Wales and Northern Ireland are among public sector workers striking about pay and conditions.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/london-uk-december-20th-2022-england-2240025825">Brian Minkoff/Shutterstock</a></span></figcaption></figure><p>The UK government has <a href="https://www.gov.uk/government/news/government-invites-unions-to-return-to-the-table-and-call-off-strikes">not yet resolved</a> the thorny issue of ongoing public sector pay disputes, despite the fact that these workers are <a href="https://www.reuters.com/world/uk/workers-strike-uk-public-sector-pay-hits-19-year-low-real-terms-2022-12-13/">suffering much more</a> from the cost of living crisis than their private sector counterparts. The <a href="https://news.sky.com/story/rishi-sunak-says-public-sector-pay-rises-will-fuel-inflation-economists-say-they-wont-12779761#:%7E:text=Rishi%20Sunak%20has%20said%20he,prices%20in%20a%20perpetual%20loop.">government is worried about wage increases</a> pushing up <a href="https://www.bbc.co.uk/news/business-12196322">inflation that is already sky-high</a>, but recent data shows that giving these workers more pay is unlikely to have that effect.</p>
<p>In the year to October 2022, private sector pay increased by 6.8% <a href="https://www.statista.com/statistics/800680/wage-growth-uk-by-industry-sector/">compared with</a> only a 2.9% increase for the public sector. This disparity has lead to <a href="https://www.independent.co.uk/news/uk/home-news/strike-dates-february-ambulance-train-nhs-b2267184.html">widespread industrial action in the UK</a> in recent months. On a longer-term basis, a growing pay gap is contributing to acute labour shortages, which is seriously affecting the delivery of public services such as <a href="https://www.bigissue.com/news/employment/highest-ever-private-sector-pay-rises-luring-workers-away-from-the-nhs/">healthcare</a> and <a href="https://www.theguardian.com/education/2022/dec/21/teachers-and-social-workers-suffer-most-from-lost-decade-for-pay-growth-in-uk">education</a>.</p>
<p>Voters largely support public sector workers’ current industrial disputes. When a recent poll <a href="https://www2.politicalbetting.com/index.php/archives/2023/01/15/the-government-is-getting-the-blame-for-the-nurses-strike/">asked the public</a> who they thought was responsible for the nurses’ strike, nearly half (49%) of respondents blamed the government and only 20% blamed the trade unions. Another poll showed 55% of the public support teachers’ current pay dispute – up from <a href="https://www2.politicalbetting.com/index.php/archives/2023/01/18/now-a-poll-has-the-striking-teachers-getting-public-backing/">33% recorded in a similar poll</a> ten years ago. Voters seem to see years of falling real wages for public sector workers as a problem, even if the government is not acting to raise them.</p>
<p>So why is the government refusing to offer a better pay deal to these workers? It argues that it is merely following the advice of the various <a href="https://www.instituteforgovernment.org.uk/explainer/pay-review-bodies">pay review bodies</a> which make recommendations on pay in the public sector. However, these bodies are not independent of government. For example, when the government imposed a pay freeze for workers earning more than £21,000 a year in 2011 and 2012, these bodies followed this lead by making <a href="https://www.instituteforgovernment.org.uk/explainer/pay-review-bodies#footnote3_c44j2lg:%7E:text=In%20some%20years%2C%20pay%20review%20bodies%20have%20been%20constrained%20to%20make%20recommendations%20that%20are%20consistent%20with%20a%20particular%20cap%20on%20overall%20pay%20growth.">no recommendations</a> on pay for staff on higher salaries. </p>
<h2>Fuelling inflation</h2>
<p>Since industrial action first started to gather speed last year, <a href="https://news.sky.com/story/rishi-sunak-says-public-sector-pay-rises-will-fuel-inflation-economists-say-they-wont-12779761#:%7E:text=Rishi%20Sunak%20has%20said%20he,prices%20in%20a%20perpetual%20loop.">concerns have been raised</a> about a <a href="https://www.imf.org/en/Publications/WP/Issues/2022/11/11/Wage-Price-Spirals-What-is-the-Historical-Evidence-525073#:%7E:text=We%20define%20a%20wage%2Dprice,acceleration%20in%20wages%20and%20prices.">wage-price spiral</a> causing entrenched inflation. This happens when rising prices prompt increased pay settlements, which in turn produce further price rises, wage increases, and so on. It happened in the UK <a href="https://www.hl.co.uk/news/articles/inflation,-wage-price-spirals-and-recessions">in the 1970s</a> when, similar to now, the rate of unemployment was very low.</p>
<p>Indeed, the unemployment rate is key to this discussion. In the 1950s, a New Zealand economist called A.W. Phillips <a href="https://onlinelibrary.wiley.com/doi/full/10.1111/j.1468-0335.1958.tb00003.x">published research</a> showing an inverse relationship between wage inflation and unemployment in the UK that had existed for nearly a century, from 1861 to 1957. During this period when unemployment was low, wage inflation was high, and vice versa. Since then <a href="https://www.stlouisfed.org/open-vault/2020/january/what-is-phillips-curve-why-flattened">the Phillips curve</a>, as it has become known, has been widely used to measure price inflation.</p>
<p>If this relationship still holds, it would mean that the current low unemployment level of 3.7% could trigger a wage-price spiral, particularly if public sector pay is increased. So it could be argued that the government’s refusal to raise public sector pay is <a href="https://ifs.org.uk/articles/what-should-public-sector-pay-policy-be-trying-achieve">a strategy to control inflation</a>.</p>
<p>But the problem with this idea is that the Phillips curve no longer works in Britain, as the chart below shows.</p>
<p><strong>Unemployment versus inflation in the UK (2001-2022)</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/505859/original/file-20230123-6007-x2323w.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Chart showing the relationship between inflation, as measured by changes in the consumer price index, and the unemployment rate; as described in the pars above and below." src="https://images.theconversation.com/files/505859/original/file-20230123-6007-x2323w.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/505859/original/file-20230123-6007-x2323w.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/505859/original/file-20230123-6007-x2323w.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/505859/original/file-20230123-6007-x2323w.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/505859/original/file-20230123-6007-x2323w.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=502&fit=crop&dpr=1 754w, https://images.theconversation.com/files/505859/original/file-20230123-6007-x2323w.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=502&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/505859/original/file-20230123-6007-x2323w.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=502&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><a class="source" href="https://www.ons.gov.uk/">Author's chart using Office for National Statistics (ONS) data</a>, <span class="license">Author provided</span></span>
</figcaption>
</figure>
<p>Using monthly data over the period from 2001 to 2022, this chart shows the relationship between inflation, as measured by changes in the <a href="https://en.wikipedia.org/wiki/Consumer_price_index">consumer price index</a>, and the unemployment rate. Below an unemployment rate of about 4%, there appears to be a steep negative relationship between joblessness and inflation, in line with the original Phillips analysis. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/an-economist-explains-what-you-need-to-know-about-inflation-188959">An economist explains: What you need to know about inflation</a>
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</em>
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<p>But although this is happening right now – inflation is very high – it is the product of supply-side influences, not wage inflation. The UK (alongside many other countries) has been plagued by <a href="https://www.ons.gov.uk/economy/inflationandpriceindices/articles/costofliving/latestinsights">supply-side inflation</a> in recent years due to the effects of Brexit, the pandemic and the war in the Ukraine on the supply of goods and services. Recent increases in energy costs in particular have really boosted inflation over the past year.</p>
<p>At levels of between about 4% and 7% unemployment in the above chart, there is essentially no relationship between inflation and unemployment. The latter is expected to rise in 2023 <a href="https://www.theguardian.com/business/2022/dec/29/five-charts-that-show-the-uks-economic-prospects-in-2023#:%7E:text=costs%20for%20exporters.-,Employment,-The%20economic%20slump">as recession conditions set in</a>, which means that raising wages in this situation will not affect inflation.</p>
<p>When unemployment exceeds 7%, inflation appears to increase alongside it, producing what is often described as “stagflation”. This occurs when prices and joblessness increase together – a difficult combination for any economy to recover from, since it produces low growth. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/1970s-style-stagflation-now-playing-on-central-bankers-minds-185868">1970s-style stagflation now playing on central bankers' minds</a>
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</em>
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<hr>
<p>This indicates that reasonable pay settlements in the public sector to compensate for falling real wages over the years could easily solve the present impasse without triggering a wage-price spiral.</p>
<h2>UK inflation outlook</h2>
<p>This finding is reinforced by the widespread expectation that inflation has now peaked and will start to fall over the next few months. Indeed, the OECD is currently forecasting that <a href="https://data.oecd.org/price/inflation-forecast.htm">inflation will fall quite rapidly</a> across the world. </p>
<figure class="align-center ">
<img alt="A line chart showing annual inflation rising sharply in the UK, France, Germany, Italy & the US from December 2019 but starting to fall in late 2022." src="https://images.theconversation.com/files/505864/original/file-20230123-13-onuiot.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/505864/original/file-20230123-13-onuiot.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=333&fit=crop&dpr=1 600w, https://images.theconversation.com/files/505864/original/file-20230123-13-onuiot.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=333&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/505864/original/file-20230123-13-onuiot.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=333&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/505864/original/file-20230123-13-onuiot.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=418&fit=crop&dpr=1 754w, https://images.theconversation.com/files/505864/original/file-20230123-13-onuiot.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=418&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/505864/original/file-20230123-13-onuiot.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=418&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption"></span>
<span class="attribution"><a class="source" href="https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/consumerpriceinflation/december2022#:~:text=a%20comparable%20measure.-,Figure%209,-%3A%20Annual%20inflation%20rates">Office for National Statistics – Consumer price inflation, Eurostat – Harmonised Index of Consumer Prices (HICP), US Bureau for Labor Statistics - Consumer Price Index for All Urban Consumers (CPI-U)</a></span>
</figcaption>
</figure>
<p>And for Britain in particular, it’s also worth remembering that public sector employment is only a relatively small percentage of total employment, further reducing the prospects for a wage-price spiral caused by public sector pay rises. Private sector employment in the UK <a href="https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/%20employmentandemployeetypes/%20timeseries/g9c2/lms">exceeded 82% of the workforce</a> in 2022, implying that “catch-up” wage settlements to compensate for declining real wages in the public sector would have much less impact on total labour costs than they would in the private sector.</p>
<p>All in all, the current government intransigence on public sector pay looks like it’s based on both bad economics and bad politics. The former because there is little prospect of wage inflation at the same time as there is a serious labour shortage in the public sector. The latter because many voters think the government is basically hostile to the public sector.</p>
<p>This view could strengthen as the general election approaches. With the state of the NHS, in particular, set to loom large in voters’ minds, this does not seem like a winning strategy.</p><img src="https://counter.theconversation.com/content/198333/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Paul Whiteley has received funding from the British Academy and the ESRC. </span></em></p>Recent price rises are not due to higher wages but supply-side issues including the war in Ukraine, the COVID pandemic and Brexit.Paul Whiteley, Professor, Department of Government, University of EssexLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1968982023-01-19T14:10:42Z2023-01-19T14:10:42ZPay inequality is high in South Africa: bosses are part of the problem<figure><img src="https://images.theconversation.com/files/503977/original/file-20230111-17-vah9ft.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Workers sew garments at a textile factory in Cape Town, South Africa.</span> <span class="attribution"><span class="source">Dwayne Senior/Bloomberg via Getty Images</span></span></figcaption></figure><p>South Africa is one of the most unequal countries in the <a href="https://data.worldbank.org/indicator/SI.POV.GINI?most_recent_value_desc=true">world</a>. This income inequality is mostly due to high unemployment and large differences in wages. </p>
<p>In South Africa today, economists and policy-makers typically focus on worker characteristics such as education to address wage inequality. Elsewhere, however, attention has recently returned to the power that bosses have to set the wages of workers. </p>
<p>In my <a href="https://t.co/TbbA4sh8Cp">study</a>, I document that employer wage-setting explains over a third of wage inequality in South Africa. In fact, for most workers, specific employers explain about half of the differences in pay. </p>
<p>Employers get this power to set wages from a combination of two things. One is the large differences in productivity between employers. The other is the lack of competition – between bosses – for workers, which is likely related to high unemployment. Both factors are particularly severe in South Africa.</p>
<p>As my paper shows, South Africa’s world-leading wage inequality has as much to do with what bosses are doing as it does with how educated or experienced workers are. </p>
<h2>Job hopping</h2>
<p>A challenge for the paper was to isolate the part of the wage that’s due to employers, and not due to worker characteristics such as education or experience. </p>
<p>One way to do this is to see how a worker’s wage changes when they move from one employer to another. These wage changes cannot be about productivity or skills – it’s the same person being paid a different wage depending only on where they work.</p>
<p>Have you ever moved jobs and received a salary bump, even though you are doing roughly the same work? Economists call this an employer wage premium. Using tax data from 2011 to 2016, I tracked nearly all formal sector job movers in South Africa to estimate this premium for every employer.</p>
<p>In a competitive labour market where bosses do not have the power to set wages, a worker should be paid similarly no matter where they go, and there should be no employer wage premium. </p>
<p>Yet, Figure 1 shows that salary bumps – and drops – after moving jobs can be enormous. A worker lucky enough to move from a low-wage to high-wage employer more than doubles their wage (light red line). The opposite may also happen: a worker at a high-wage job may be forced to move to a low-wage employer, and get paid much less (light blue line).</p>
<p>Figure 1: Wages over time of workers who switch to a new firm </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/504162/original/file-20230112-21-rohz5t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/504162/original/file-20230112-21-rohz5t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/504162/original/file-20230112-21-rohz5t.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/504162/original/file-20230112-21-rohz5t.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/504162/original/file-20230112-21-rohz5t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/504162/original/file-20230112-21-rohz5t.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/504162/original/file-20230112-21-rohz5t.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Notes: The plot shows the wages of workers who stay at the same firm for three years (-3 to -1) then switch to a new employer and stay there for the next three years (0 to 2). The legend shows types of employer switches:</span>
<span class="attribution"><span class="source">Ihsaan Bassier</span>, <span class="license">Author provided</span></span>
</figcaption>
</figure>
<p>These differences between low- and high-wage employers drive up wage inequality. Altogether, I estimate that employers account for 36% of wage inequality in the formal sector.</p>
<p>Accounting for other sources of inequality (for example, the fact that some people have jobs and others do not), employer wage premiums account for roughly one fifth of overall income inequality in South Africa today. </p>
<h2>The boss is a big factor</h2>
<p>Much of the discussion on inequality in South Africa is about access to high quality education. This is important. But my research shows that a large part of inequality is also due to which specific employer you land at. </p>
<p>In Figure 2, the difference in total wages for all except the highest paid workers is as much explained by differences in specific employers (red) as differences due to worker characteristics (blue). The upshot is that large parts of workers’ wages have little to do with education.</p>
<p>Such differences in wages due to the specific employer are found in many other countries too. But South Africa stands out for just how much inequality employers account for, at least compared to estimates for richer countries.</p>
<p>Figure 2: Components of income due to worker characteristics and employers, by income decile</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/504163/original/file-20230112-18-9401q2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/504163/original/file-20230112-18-9401q2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/504163/original/file-20230112-18-9401q2.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/504163/original/file-20230112-18-9401q2.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/504163/original/file-20230112-18-9401q2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/504163/original/file-20230112-18-9401q2.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/504163/original/file-20230112-18-9401q2.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Notes: Workers’ wages are divided into deciles, and split into the average portion due to employer wage premiums (red) and worker characteristics (blue). Premiums are shown relative to workers with wages in decile 5. Source: South African NT-SARS tax data, own calculations.</span>
<span class="attribution"><span class="source">Ihsaan Bassier</span>, <span class="license">Author provided</span></span>
</figcaption>
</figure>
<h2>Why do bosses increase wage inequality so much?</h2>
<p>The leading economic models explaining differences in wages due to specific employers focus on employer productivity dispersion and monopsony power. Monopsony power is when bosses face little competition from other bosses for the labour they employ.</p>
<p>The amount of money you make for an employer, or revenue productivity, depends on many things that are specific to that employer. For example, they may have better technology or have a popular brand. Employers with higher productivity generally pay workers more, and so bigger differences in revenue productivity across employers induce greater wage inequality.</p>
<p>This dispersion in revenue productivity is large in South Africa compared to estimates for richer countries, but is similar to other developing countries like India and China.</p>
<p>However, such revenue productivity dispersion only matters for wage inequality insofar as employers have monopsony power. Without some monopsony power, workers would just quit to the highest paying employer. Indeed, one way to measure this power is to see how much employers can lower wages without workers quitting. </p>
<p>My estimates suggest that there is more monopsony power in South Africa than other places. Bosses pay workers a smaller portion of what is produced, thereby contributing more to the high wage inequality in South Africa. This also means workers face a higher rate of exploitation. </p>
<p>This high employer monopsony power may be due to South Africa’s high unemployment. When unemployment is high, it is more difficult to find a job, and so workers are more reluctant to quit in response to an employer wage cut. This has long been popularly understood in terms of the Marxian “reserve army of labour”. Thus employers potentially link two of the country’s most devastating features: inequality and unemployment.</p>
<h2>Implications for policy</h2>
<p>Policy prescriptions to reduce employer monopsony power are complicated. Nevertheless, it should be clear that the contribution of employers to South Africa’s inequality crisis warrants attention. There are potentially large benefits to wages, employment and even taxation.</p>
<p>My analysis reinforces the need to centre the power of bosses over workers in economic analysis.</p><img src="https://counter.theconversation.com/content/196898/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Ihsaan Bassier is also a researcher at the Southern Africa Labour and Development Research Unit at the University of Cape Town. Access to the SARS tax data used in this article was granted through the SA-TIED programme, a joint initiative between the National Treasury of South Africa and UNU-WIDER. He also received funding and support from the the Southern Centre for Inequality Studies at Wits University.</span></em></p>South Africa’s world-leading wage inequality has as much to do with what bosses are doing as it does with how educated or experienced workers are.Ihsaan Bassier, Researcher in Economics, London School of Economics and Political ScienceLicensed as Creative Commons – attribution, no derivatives.