On Monday 18 September The Independent reported that Iain Duncan Smith (IDS) thinks “businesses have a role to play in ups killing their workforce”. And while the typo was obvious, intentional or not the sentiment was maybe not far wrong. Because a new report by IDS’s think tank says UK employees aren’t making their bosses enough money.
Kill them. Kill the workers
A typo by The Independent in what’s known as the ‘standfirst’ was obvious:
And to add insult to injury, The Independent’s “ups killing” quote from the former Work and Pensions Secretary appeared again:
Please listen to IDS
But the error pointed neatly towards a report by the Centre for Social Justice (CSJ), which IDS chairs. Called The Great British Breakthrough, it attempts to deal with what the CSJ describes [pdf p12] as the “post-recession economic zeitgeist” productivity problem. The definition of productivity is broadly how efficiently capital (money spent) and labour (the worker) are producing goods or services. It is usually measured in output per worker, or output per worker hour.
IDS claims [pdf p9] the CSJ report is:
a call for government to reconsider productivity as an issue that can be best solved by breaking down social injustices that cause poverty and empowering the most disadvantaged by giving them opportunity to thrive. Productivity is so often seen as an abstract economic phenomenon, when in fact it is shown here to have dire social consequences for those most in need across our society…
But the CSJ’s reasons for low productivity, and what it think needs to be done, are typically conservative in nature. And could have us all working until we drop.
But… But… the financial crisis!
The CSJ says that since the 2008 financial crisis:
- Average annual productivity growth [pdf p22] has “stagnated” at 0.1%, compared to 1.8% between 2000-2007.
- But the employment rate hit [pdf p23] 74.8% in the first quarter of 2017.
- The manufacturing sector has shrunk [pdf p29] by 6.1%. But the service sector has grown by 10.7%.
- Full time workers work [pdf p25] on average one hour less a week (37.5) than they did in in 1996.
- Average weekly wages have not recovered [pdf p53] to above £480 (the ‘pre-crisis level’).
But what IDS’s think tank fails to acknowledge is that since 2008:
- ‘Fat Cat’ pay has increased more than 10%, with the average FTSE 100 boss now earning 129 times more than their employees.
- The 1,000 richest UK families have increased their wealth by more than 112%.
- London has now got more billionaires than any other city on the planet.
- The FTSE 100 has repeatedly hit record highs.
Where there’s blame…
Never mind, though. Because IDS’s think tank believes the productivity problem has been caused by:
- Low levels [pdf p38] of business investment, resulting in ‘investment per employee’ being about the same as it was in 1999.
- Research and Development (R&D) funding by both government and business remaining low [pdf p44] compared to other countries.
- Innovation stalling; for example the UK lags behind [pdf p45] other major economies in the number of yearly patent registrations; robotics are not fully utilised [pdf p45]management [pdf p47], and bad are all cited.
- UK workers operating [pdf p50] below the median productivity output of other countries.
But the CSJ is ignoring the fact that:
- Executive bonuses were £44.3bn in 2015/16, higher than pre-crisis levels.
- The 1,000 richest UK families now have more money than the poorest 40% of households, combined.
- 164 of the top 1,000 richest people in the UK make their money from property. They are worth £143.7bn, but this money doesn’t actually produce anything.
- Corporation tax rates have fallen from 28% in 2008 to 19% now. This cut has reduced the total tax payments by companies (as a share of national income) from 3.2% pre-crisis to 2.6% now.
Detached from reality
The CSJ says that to solve the productivity problem the UK must:
- Tackle [pdf p59] low pay by increasing the number of “good jobs”; make it easier for employees to get promoted and support “productivity growth” for workers.
- Improve [pdf p61] educational attainment; increase [pdf p63] the number of people doing vocational qualifications (eg apprenticeships) and improve [pdf p68] “in-work professional development”.
- Invest [pdf p84] in infrastructure, housing and universities, and encourage [pdf p86] “big employers” to move to low productivity areas.
- Increase [pdf p93] R&D investment; encourage entrepreneurs and improve management in companies.
- Lower and simplify [pdf p94] tax rates; specifically the Annual Investment Allowance, currently £200,000 a year, should be increased to £500,000.
Its thinking, though, ignores the reality of the situation in the UK. Because since the Tories first came to power in 2010:
- The number of full-time self-employed people has increased by nearly half a million [spreadsheet column K], and part-time by 342,000 [column L].
- 35,000 more people are on temporary training contracts [spreadsheet column S].
- Around a million people are on zero hours contracts.
- There are 10,000 more unpaid family workers [spreadsheet column E].
- 14 million people, including four million children are living in poverty, of which 66% are in working households.
IDS: kill disabled people, too?
But most worryingly is the CSJ claim [pdf p14] that IDS’ welfare reforms:
have helped 3.1 million people into work since July 2010, some for the first time in generations.
This ignores four separate reports from the UN in just 14 months. And they all say that IDS’ welfare reforms have caused poverty, mental and physical damage to people, especially disabled people – and that they should be reviewed or scrapped altogether.
Get in the sea
The CSJ’s report shows the detached nature of Tory politicians like IDS. Because, even though the facts fly in the face of his and his think tanks’ theory, they both still blunder on regardless.
The report is a perfect example of crony capitalism on its last legs. Instead of actually paying a decent wage, closing the gap between fat cat executives and workers, and making corporations pay their fair share, IDS and his think tank believe workers need to work harder and make more profit for their bosses. Only then can they be lifted out of poverty; poverty which, of course, the Tories and businesses helped create in the first place.
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