Date: Sat, 2 Aug 97 11:07:37 CDT
From: rich@pencil (Rich Winkel)
Subject: GL: Low pay, no way! Solving the jobs crisis
Low pay, no way! Solving the jobs crisis
By James Vassilopoulos,
in Green Left Weekly
2 August 1997
When asked on radio 2GB on July 7 about the United States' "low"
unemployment, Prime Minister John Howard said: "We have as a
nation over the years adopted as part of our ethos a higher
minimum wage than many other countries. Now, one of the
consequences is that you do have a higher level of unemployment
... there is no doubt in the world that the Americans do have much
lower minimum wages."
Even prior to Howard's comments, the commercial press was
promoting the US government's economic policies with headlines
such as "Why it's boom town USA" in the June 5 Sydney Morning
Herald, or Anne Summers' article "There's dancing in the streets"
in the July 20 Sydney Morning Herald, or the article in the June
20 Australian Financial Review entitled "How the US has licked
Their argument is that the US has a low unemployment rate compared
to Australia because it has lower minimum wages, a more flexible
and mobile work force, and a more deregulated labour market. If
Australia were to follow suit and lower minimum wages and
unemployment benefits, they claim, this would alleviate the
unemployment crisis. And anyway, they say, a low paid job is
better than no job.
Howard's talk about "debate" on the issue is code for his plans to
implement a lower minimum wage. His repeated calls for more
flexibility and mobility in the Australian work force are code for
more cuts in conditions and letting the employers run the show.
As has occurred in the US, a cut in the minimum wage here would
put enormous downward pressure both on other workers' wages and on
unemployment and other welfare payments.
A minimum wage that is little more than unemployment benefits
would mean there is no financial reason to work, especially
because it actually costs workers' to travel to, dress for and eat
This downward pressure has already begun -- the introduction of
youth training wages was quickly followed by the abolition of the
dole for under 17 year olds.
In the context of high unemployment, a lower minimum wage would
enable employers to cut other wages down to the minimum or
approaching the minimum wage. Threatened with replacement by a
worker from the queues of unemployed, many workers would have to
accept lower wages.
While Howard is calling for a cut in the minimum wage (whatever
happened to "no worker would be worse off" under his government?),
profits are booming. According to the Australian Bureau of
Statistics, total profits before income tax in 1995-96 were $24.8
billion. In 1991-92 they were just $12.3 billion. Most
working-class people would be well pleased with a 102% increase in
their income over four years.
Howard and the big business media's argument is full of falsities.
First, the official unemployment rate in the US does not reflect
reality. According to May 1997 US Department of Labor statistics,
in April the unemployment rate in the US was 4.9% or 6.7 million
people -- apparently much lower than Australia's rate of 8.6%.
But to the 6.7 million officially unemployed, we need to add 4.8
million who are not officially in the labour force because they do
not fully satisfy the criteria (available and actively seeking
work), but who do want a job. We also need to add the
under-employed (part-time workers who want more hours), another 4
million. This takes the real unemployment rate to around 12%.
Furthermore, the US can hardly be said to be "licking
unemployment" when it had an official youth unemployment rate at
the end of 1996 of 34.3% and a rate among African-Americans and
Hispanics that is often double that of whites.
Secondly, Howard failed to mention that the US's lower minimum
wage and lower non-wage costs result in a much higher level of
poverty and wage inequality.
According to the January 21, 1996, Left Business Observer, the
"United States has the most unequal distribution of income among
the Luxembourg Income Study countries [an international database
of income and its distribution] and probably anywhere in the First
Forty million people in the US live in poverty -- 14.5% of the
population. Some 18% of full-time workers live below the poverty
line. At least 12 million workers earn US$5 an hour or less. Many
immigrants without a green card (the legal document required to
work in the US) earn much less than this.
Free labour within prisons and "work for welfare" schemes have
taken the jobs of other workers. The Workfare scheme in New York
City, for example, has more than 35,000 workers, whilst recently
500 union members lost their jobs.
More generally, Howard's statement that there is a trade-off
between wages and unemployment does not hold up. Spain and Ireland
have low labour costs but extremely high official unemployment
rates (22.7% in Spain and 12.9% in Ireland according to 1995 OECD
figures). Norway has a centralised industrial relations system and
high wages but an official unemployment rate of only 4.9%.
In Australia since the late 1970s, there has been a large increase
in the rate of unemployment. In 1977, it was 5.6%; today it is
8.5%. Yet since 1983 real rates of pay have fallen in the order of
17-28%, depending on the award.
According to the International Labour Organisation report World
Employment 1996/97: "Labour market rigidities [including decent
wages and working conditions] have not been increasing over the
period of rising unemployment; if anything labour markets have
become more flexible."
The April 3, 1996, Left Business Observer points out that in all
OECD countries there is no link between inequality and low wages,
and unemployment; the relationship "is about as good as random".
The clearest refutation of the low wages equal low unemployment
argument lies in the Third World. Eighty per cent of the world's
population live in these countries, which are characterised by low
wages and high unemployment. This is a result of the role these
countries are assigned in the international capitalist division of
labour -- producing cheap commodities (e.g. raw materials and
agricultural products) for manufacturing in the advanced
Unemployment statistics for Third World countries which take into
account the huge informal sector of the economy are difficult to
find. However, real unemployment rates of over 20% and wages of
less than A$10 a day are common. The huge decreases in real wages
in many Third World countries over the last couple of decades have
in no way alleviated their unemployment crises.
Unemployment is not a result of wages being too high. It is a
problem inherent in the capitalist system.
The long wave of stagnation in the capitalist economy which arose
in the mid-'70s is reflected in lower growth rates,
higher worldwide levels of unemployment and increased poverty.
Booms and recessions occur as modifications of this longer period
To compete, each capitalist must constantly strive to reduce
production costs by lowering wages and investing in labour-saving
(shedding workers). Lower wages and more unemployed people mean
workers can buy fewer commodities, exacerbating overproduction.
This economic system is driven by the need to maximise profits,
not employment. Because there is no social control over how those
profits are used, there is no guarantee that increased profits
will result in more jobs.
The only way that capitalism can attempt to solve the crisis of a
declining rate of profit is by destroying the capital stock or by
rolling back the gains in wages, conditions and public welfare
made by the working class since the turn of the century.
Statistics on the US economy in the May 14 Left Business Observer
clearly reveal the crisis in even the strongest economy in the
world. For the years 1945-1990, the US economy during periods of
expansion averaged growth in employment of 3.4% per year, earnings
1.4% and gross domestic product 4.4%. For the 1990-97 period,
average employment grew by 1.8%, earnings declined by 0.1% and GDP
grew 2.7% per year
With the next recession, unemployment levels will go up again.
Each capitalist boom never quite lowers the unemployment rate
below the level of the previous boom.
Howard's rhetoric about solving the unemployment crisis is just
that. He will not and can not fix a crisis that is intrinsic to
the world economic system. However, by linking the supposed
solution to unemployment to lower wages, Howard can and is trying
to increase the profitability of his corporate mates.
Saying that the capitalist rulers will not move to eradicate
unemployment does not mean that it cannot be done. The
introduction of a 35-hour week in Australia, for example, where
the average full-time worker now labours for 42.4 hours a week,
would create more than 1 million jobs.
Even more jobs could be created by governments if they were
prepared to increase corporate and income tax rates on high
The profit rates of big business are still more than sufficient to
fund a shorter work week with no loss in pay. The French trade
unions understand this and are campaigning strongly for just that.
This article was posted on the Green Left Weekly Home Page.
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