Liebrary: Are wages and employment rights being cut to make Britain more competitive? Or is there another reason?

Our leaders tell us we must be more competitive. So we can work ourselves out of the banker induced crisis. They tell us that to earn money to pay off the debts that came from the crisis we must compete with other countries to attract companies to Britain. 

To do this they tell us we must have a more flexible labour market (i.e. easier for companies to fire us), more competitive wage structure (i.e. pay us lower wages), and we must cut corporation tax for the companies (i.e. reduce companies' contribution to the public purse, paying for the NHS, schools, defence, roads and stuff like that).

So we thought we would look to see how uncompetitive we actually are in terms of wages, sackings, and tax at the moment:

a) Compare wages, and we see the UK average wage measured by the EU is well below other major European countries, and below the average of all the EU27 countries.

Statistics from the European Union, Europa.eu (As figures are in Euros, UK average wage rise is impacted by exchange rate of strengthening pound in this period)

b) Compare labour market flexibility measured by employment protection and how easy it is to fire us: We see UK worker protection is the joint second worst in the OECD:


c) Compare corporation tax rates, using this graphic produced by HMRC for the 2013 budget: We see corporation tax in 2015 will be well below that in the G7. Even before this cut, UK corporation tax is the lowest (main rate is 23% in 2013, and 21% in 2014).

The data shows we already have low wages, low employment protection, and low corporation tax. And yet Britain shows scant sign of recovery. Nothing but anaemic growth, with the worst recovery of any recession since 1920:




Fitch, the second agency to strip the UK of its AAA credit rating in April 2013, stated:  "The downgrade of the UK's sovereign ratings primarily reflects a weaker economic and fiscal outlook". If the government's objective is to strengthen our economy, then all the cuts in wages, benefits, pensions, employment rights, and even all the cuts in top rate income tax and corporation tax are not working. 

Is this failure incompetence? Or is it failure at all? Is it actually sublime competence, and we are simply missing the point?

We wonder whether all this cutting has nothing to do with encouraging more companies to come to Britain to employ us. And has everything to do with using the Banking Crisis as cover to further exclude 90% of Britons from a share of the national wealth. Austerity and competitiveness is being used to justify cuts to those not working - pensioners and the unemployed - and cuts to those who are working - salaries and in-work benefits. Keeping more for the top 1%. This rip-off has been happening to Ripped-Off Britons for decades (through both Labour and Tory led governments):

http://topincomes.g-mond.parisschoolofeconomics.eu/#Database:

And the share of national income being paid to employees, as a percentage of GDP, has been dropping since the 1970's:

In spite of this fall in employees' share of GDP, leaving more with companies as profits, the government plans to virtually freeze the amount paid in corporation tax while increasing the amount paid in income taxes:



The government response to the stripping of our AAA credit rating by Fitch was:

"This is a stark reminder that the UK cannot simply run away from its problems, or refuse to deal with a legacy of debt built up over a decade. Though it is taking time, we are fixing this country's economic problems."

Thus we see George Osborne's logic:
Rating maintained = proof austerity and cuts work = more austerity and cuts.
Rating stripped = proof we need more austerity and cuts = more austerity and cuts.

What Osborne has forgotten, unless concentrating wealth in the hands of the few is his over-riding objective, as he takes from the 90% (wage freezes and benefits cuts) to give to the wealthiest (tax cuts) is most of the spending is done by ordinary people. Companies come to a country not just to employ people to make stuff, but also to sell stuff. According to government statistics, although the poorest 50% have virtually no wealth,  they do 30% of the spending. Although the richest 10% have over 70% of the wealth, they only do 20% of the spending.

As the Governor of the Bank of England in May 2011 told MPs:

"'The price of this financial crisis is being borne by people who absolutely did not cause it"  "Now is the period when the cost is being paid, I'm surprised that the degree of public anger has not been greater than it has."