Radical realism

In The Contentious Alliance, historian Lewis Minkin talks about the central role of shared historical projects in binding unions to the Labour party. Although there are well understood transactional aspects to the alliance, it is the shared commitment over time to trade union rights, employment protections and progressive economic and social policy that has kept party and unions broadly united as a coherent movement.

Improving pay for working people has, of course, always been an instrumental component of this project, to be achieved by both the unions themselves through voluntary collective bargaining and through policies enacted by enlightened Labour governments. As the party and affiliated unions contemplate the challenges that an incoming Labour government will face in 2024 or sooner, it is important to reflect afresh on this historical goal and develop a shared understanding about what needs to happen for pay to increase meaningfully in the years ahead.

The context is one of flatlining wages that have seen the incomes of people in the UK fall significantly behind those of workers in comparable countries. Analysis for the Resolution Foundation Economy 2030 inquiry shows that wages grew by an average 33 per cent a decade from 1970 until 2007, but then fell to below zero in the 2010s. The result is that by 2018, typical household incomes were 16 per cent lower in the UK than in Germany and 9 per cent lower than in France – having been higher in 2007. With current levels of inflation far outstripping pay settlements, this situation is likely to have deteriorated further by the time of the next election.

Many of the potential solutions advocated by the opposition frontbench will be popular with trade unionists. Rachel Reeves has announced that on day one as Labour chancellor she will write to the Low Pay Commission with the instruction that the minimum wage should be set at a level that reflects the cost of living, and Angela Rayner’s New Deal for Working People has set out a comprehensive package of commitments on trade union and employment rights that have collective bargaining and sector-level fair pay agreements at their core.

But, in some respects, these measures can only provide part of the solution. The more difficult part is to construct effective policies that deliver higher sustainable growth and improved productivity – and to re-connect economic success with higher pay. It should come as no surprise that just as UK household income is falling behind that of France and Germany, so the economy as a whole faces a worsening productivity gap with these countries.

Again, a good start is being made with Labour’s industrial strategy and its commitment to create better jobs and forge a more grown-up relationship with our largest trade partner, the EU. Other non-party initiatives such as the Resolution Foundation’s Economy 2030 Inquiry also promise new analysis that should help frame better policy options for the period ahead.

But addressing wider structural economic challenges will be complex and take time. The question, therefore, is how to stay the distance, especially in such challenging economic times. Nobody should need to be reminded about how contentious the alliance between Labour and the unions became under similar circumstances in the 1970s.

To this end, the labour movement as a whole will need to combine radicalism with realism. The unions themselves need to acknowledge that collective bargaining and industrial action have their limitations when it comes to increasing pay and forging a more pro-worker economy. Collective bargaining remains meaningful in legacy heartlands, and it can expand in the future. But, even without anti-union legislation (which Labour will scrap), current low membership, poor organisation and the absence of initiatives to unionise growth sectors of the labour market will mean the movement has to be patient. Outside of public services, four of the five sub sectors projected to grow most jobs over the next five years (hospitality, support services, professional services and IT) are in the bottom five in terms of trade union density.

Labour, for its part, should make pay growth an explicit goal of industrial and economic policy and institutionalise this objective, including making it a central mission of the Industrial Strategy Council. It will also need to continually demonstrate progress on public sector pay, even if initial increases are merely a ‘down payment’ accompanied by a genuine plan to repair the damage done to people’s incomes since 2010.

Keir Starmer said at this year’s TUC Congress that collective bargaining and trade union rights are not barriers to higher growth and productivity, but that they go hand in hand. It’s now important that the movement as a whole rises to the challenge and demonstrates this to be true.

Image credit: Roger Blackwell via Flickr, CC BY-NC 2.0