The rise of mass poverty
Stewart Lansley and Joanna Mack
This review was for the book of the month section in February 2015 of UNITE Education.
This highly readable book is a devastating critique of how poverty levels that have increased right across the UK since the 1980s are the result of successive governments political choices that urgently need reversing.
Breadline Britain was the title for a 1983 TV series. By measuring the public’s perception of contemporary needs then for the first time public opinion was established as the central determinant of minimum living standards across the nation. This approach was refined in subsequent surveys in 1990, 1999 and two in 2012. The findings showed that the public accept that minimum living standards need to reflect present not past standards of living.
Needs are seen as extending beyond basics such as food and shelter. People are poverty-stricken when their income falls so far beyond that of their community that they cannot participate in it. As such, the percentage of households lacking three or more items or activities rated as necessities has doubled to 30 in 2012 from 14 in 1983. The latter was the year in which Prime Minister Margaret Thatcher told Norman Tebbit “we should neglect no opportunity to erode union membership,” as she fully understood that organised labour was the primary obstacle blocking her economic objectives that included allowing inequality to grow.
The likes of Thatcher contended that greater inequality had become a drag on economic dynamism and that poverty could not be eradicated by a narrower gap between rich and poor but by growth. What counts is the size of the cake not how it is distributed.
The worldwide experiments ever since of deregulated, unequal capitalism and greater inequality, boosted by massive tax cuts for the wealthy, have though miserably failed to bring, except for a modest number of people, the promise of a bigger cake.
In truth it never was going or intended to. The International Labour Organization has shown how nearly all large economies are ‘wage’ not ‘profit’ led and they experience slower growth when an excessive share of output is colonised by profits and how with less going to wages then purchasing power inevitably drops. The political solution adapted to this was to allow private debt to rocket, rising from 45 per cent of incomes in 1981 to a staggering 157 per cent in 2008. Meanwhile, the UK’s corporate cash piles stood at £166 billion in 2013, up a third in just five years. Internationally, wealth held offshore and hidden from the authorities is believed to be between $7.6 and $21 trillion. The rich are hoarding the money they’ve made from lower wages rather re-investing it in productive enterprises.
Poverty levels have thus leaped, especially amongst those at work. In 1983, one-third of those in poverty were in a household where the ‘head’ was working full or part time. Today it is 60 per cent. Bad jobs, zero hours contracts is currently further squeezing pay. Meanwhile, with the Tories dropping the human face they paraded when out of government, benefit levels have been cut and made even more restrictive. The New Policy Institute has identified that 63 per cent of families affected by the coalition’s cuts were already below the poverty level.
The result has been an increasing reliance by many people on borrowing from high interest loan companies and food banks, with the latter increasingly becoming a substitute for a uniform system of decent state support.
According to Lansley and Mack, a radical government programme is needed to prevent poverty rising further. With no advanced economy achieving a low rate of poverty without social investment in education, training and the provision of universal childcare then paying for all these will require boosting tax receipts by, amongst other initiatives, increasing the current 45% top rate of tax paid on annual earnings over £150,000.
Although the post-war welfare state was introduced on the assumption that there was a commitment to full employment and decent pay it has become the case that the benefits system has been used to step in to compensate for market failures to deliver decent livelihoods and housing opportunities. The growing housing benefit bill that has jumped from six to 22 billion £s in 20 years is the result of runaway house prices and a lack of affordable, socially provided housing.
Increasing the minimum wage and upping the numbers on the living wage should be part of policy objectives that include a commitment to full employment. Upping women’s pay in order to cut the 19 per cent pay gap between men and women is required.
Restoring the bargaining power in favour of the workforce back towards the 80 per cent covered by collective bargaining in 1979 rather than the current 25 per cent would be highly effective. Evidence consistently shows that the higher the level of trade union membership in a society the lower the degree of inequality. The erosion of trade union strength has also encouraged British employers to move down a low pay and productivity road with few incentives to improve workers skills, invest in research and development and introduce more productive processes.
With record corporate cash balances being held by large companies then a wage rise across many parts of the British economy is certainly feasible and it would have the effect of further boosting spending.
Many UNITE members reading this would undoubtedly agree with Lansley and Mack’s analysis and their objectives of slashing poverty as part of an economic package that will boost the economy as a whole. What the book lacks though is some understanding of how this might be achieved. They point to how the number of employers agreeing to pay the living wage has risen and how all the main political parties favour a modest hike in the national minimum wage. They illustrate how grass-roots pressure groups such as the Living Wage Campaign have launched high profile campaigns. They show how even the IMF head Christine Lagarde has warned that economic stability relies on a “more equal distribution of income.”
What is sadly ignored is the need to encourage all workers to become active trade unionists. No one pretends that this will be easy. But it is really only when workers are organised within their workplaces that they can achieve decent pay and conditions, not forgetting exerting greater power on politicians for radical economic and social changes.
These criticisms aside this book is very definitely worth reading. Lansley and Mack are to be congratulated in assembling in relatively few pages a wealth of information. It is to be hoped that their work helps encourage a debate on poverty at the forthcoming general election.