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Tony Cliff
& Colin Barker

Incomes policy, legislation and shop stewards

Chapter Five: The wages front

National wage negotiation and wage drift

Workers’ earnings depend on two main factors – firstly, industry-wide bargaining between the national trade union or group of unions and the corresponding employers’ organisation, and, secondly, bargaining within the individual firm. Generally speaking, national minimum rates are bargained on the national level, while at the local level negotiation takes place over such matters as piece-work rates and other forms of payment by results, additions to wage rates such as bonuses, and local rules and practices including the manning of machines and demarcation questions. Of course, this two-tier system of negotiating does not apply to all workers. Where there is only one employer, who fixes a standard rate of earnings for all workers in his employment – as in the public services, on the railways and buses, and in teaching – the two-tier system does not apply. Broadly speaking, the two-tier system applies to most of the private sector, with the exception of highly centralised areas like the banks.

Where there is only a one-tier system of negotiation, the national collective agreement must specify the actual pay received by workers quite closely. [1] Most of the “wage drift” which we discuss below is generated in industries with the two-tier system of negotiation, but a two-tier system has a quite large, although indirect, impact on the one-tier system, because workers in one industry always compare their actual earnings with what workers in other industries are getting. This process has been called “leap-frogging”. National bargaining in the two-tier system between the union or group of unions and the employers’ organisation determines the national minimum wage for a particular industry. This is not necessarily what workers in that industry earn, however. Thus, for example, in 1964 the national standard time rate for an engineering fitter was £10 11s 8d, but actual average earnings for all fitters on time rate (excluding overtime) were £16. [2] The difference between nationally negotiated wage rates and actual earnings is called the “wage drift”:

Since 1948 the standard wage has fallen as a proportion of average wage earnings in most industries, while the importance of supplementary payments – the difference between the nationally negotiated wage rate and earnings (excluding overtime payments) – has grown. As a proportion of earnings, supplementary payments in manufacturing rose from about 19 percent in 1948 to about 26 percent in 1959. [3]

Although wage drift has played an increasingly important part over the economy as a whole since the war, it actually varies quite considerably between the different industries, to a large extent according to the strength and organisation of the workers in the different firms. The following table illustrates this:

In the building industry the wage drift is very large. Thus, while the three-year agreement signed recently offers builders an increase of 9½d an hour spread over three years, the actual bonus on building sites of London is very often about five or six shillings an hour.

Actually, the term “wage drift” is a little misleading. It would be much better called wage drive, since it is the result of pressure from workers in the better organised industries and firms under conditions of full employment.

Now the impact of wage drift (or wage drive) on the general standard of earnings is much greater than it looks in the simple calculation of the proportion of wage drift in the nationally agreed minimum wage. This can be seen if we look at the dynamics of wage bargaining.

Let us assume that national negotiations gave a fitter a minimum wage of £5 a week, and that in a whole number of factories the wage drift amounted to another £1 a week. In the next round of national bargaining the pressure in all factories would be to raise the national minimum to £6 a week, and again the better organised workers would push ahead for a further wage drift, and so on and so on. In this way the most advanced section of the engineering workers would affect not only the actual wage drift, but also the national standard. Not only the “ceiling” but also the “floor” would be raised. [5]

And in industries where there is only one tier of negotiations, as on the railways, wages are affected by wage drift in other industries. The railwaymen demand wages comparable to the earnings of workers in other industries where wage drift has taken place. No driver of a railway engine would accept a wage similar to the nationally negotiated minimum wage for fitters, that is something like £11 a week. What he would want, and would get, would be something similar to the fitter’s actual earnings, including both the nationally negotiated wage rate and the wage drift.

In some cases the causal chain works in the opposite direction. National wage rises are followed by changes in the earnings of various groups, so that other groups of workers will try to restore the percentage difference between themselves and those who got their wage rises through national negotiations.
 

Social justice: will an incomes policy help the lower paid workers?

George Brown and others have argued that if the workers who are in a stronger position would only forgo part of their wage rises, this would help the lower paid workers. In other words, the wage that the stronger workers give up by holding back on their wage claims will be given instead to the poorer section of the working class. This idea is accepted by many workers, who agree that incomes policy is a good thing in principle, even if they don’t agree that it applies to themselves at present. But in fact the whole idea is based on a misunderstanding.

For instance, if BMC workers were to hold back on a claim for another £1 a week, would the management of BMC transfer the accumulated pounds they had saved to, say, the nurses, or would they transfer it into BMC’s bank amount? We have only to ask the question to see what the answer is. In fact, the way that wages are won under capitalism is quite simple – workers in the strongest sections, in the technologically advanced industries, where they are best organised, win increases, and then the rest of the working class keep up by the simple process of comparing their own wages with those received by the strongest and best paid.

This is continually being shown to be true. Let us take, as an example, the recent case of the employees in the electricity supply industry. In May 1965 pay claims for the 50,000 white collar workers in the electrical supply industry were hinged on the improved pay and conditions that had recently been won by the manual workers in the industry. The existing three-year agreement that had been signed in January 1964 provided for an annual increase for the white collar workers of between 3 and 3½ percent. But as the manual workers won more than this (in return for certain “productivity” concessions), the white collar workers insisted on following suit, and threatened a strike on 22 June. The case was referred to the National Board for Prices and Incomes, which declared that the white collar workers’ claim was not justified. It was, said the board, in conflict with the “guiding light”, especially since the white collar workers were making no productivity concessions:

We conclude, then, that a revision of the three-year agreement for the administrative and clerical staff would not be justifiable under the criteria set out in the white paper as justifying an exceptional pay increase. We conclude also that the concession for the lower grades to which the employers have agreed, though they have not been put into effect, go beyond anything that would be warranted by the criteria of the white paper. [6]

However, the pressure from the white collar workers was too great, and the board came to the conclusion that “disturbance money” should be paid to them:

The basic problem with which we have had to contend is that in one and the same industry major changes in working practice have been secured from some categories of staff and that these changes have been compensated by considerable additions to pay, while the pay of workers from whom no major change is required is left unchanged. As a result there has arisen a sense of disturbance which the efficient working of this industry requires should be reduced. [7]

The result was an 8 percent salary rise – as “disturbance money”. Once this was granted, the clerical workers in the gas industry began to feel “disturbed” ...

Or again, there is the case of the lowest paid workers, whose wages are fixed by the Wages Councils. There are some 3½ million of them – agricultural workers, workers in laundries, milk distribution, dressmaking, baking and many branches of the retail trade. Will restraint in making wage demands on the part of the well organised workers help and encourage these workers, who are in the main not organised, to join trade unions and thus help them to fight for better conditions? Of course not.

All past historical experience shows that with the general rise of wages, a rise which has been largely associated with the struggles of the better organised section of the working class, the differences within the working class have not increased, but on the contrary have declined considerably: “... the differential between skilled and unskilled grades, for example, which had stuck at around 50 percent for a long time prior to 1914, has by now been whittled away to 20 or 15 percent”. [8] (In other words, the unskilled worker’s wage has risen from 50 percent to between 80 and 85 percent of the wage of the skilled worker.)

In fact, everything that raises the standard of living of the workers, skilled and unskilled alike, diminishes the differences between them. For this same reason differentials in backward countries, where workers have fewer rights and are much more downtrodden, are much greater than they are in the advanced, industrialised countries. This is shown clearly by the following table, which compares the wages of skilled and unskilled workers between the two world wars in Britain, an economically advanced country, and Romania, a backward country:

Or again:

Typical rates for skilled men in Western-type industrial economies are 15 to 40 percent above those of labourers. In Africa and Latin America the typical skill differential appears to be from 50 to 150 percent, even when no racial element is involved. The average non-manual worker’s salary was about three times the average wage in Egyptian industry, compared with a ratio of some two to one in Britain. [10]

The final blow, if it was needed, to the myth that incomes policy will act as an angel of social justice by helping the lower paid workers was given by Aubrey Jones when he refused any rise to the rail workers in January 1966. In his report the wages per standard week (excluding overtime) were given as follows: porters £10 18s; leading luggage room attendant £12 5s; second year guard £12 19s; qualified fireman £14 8s; qualified train driver £16 19s. [11] There was no suggestion, however, that more pay should be given to the wretchedly underpaid sections.

In fact it is best to see the different sections of the working class as standing on different wage escalators. The speed at which one escalator moves affects the speeds of all the others, and in the same direction. If one accelerates, so do the others. If one is held back, so will the others be. In other words, if the strongest and best organised workers hold back, the whole working class will be held back with them.
 

Effects of national negotiation on the general level of wages

We do not of course mean to say that only “wage drift” determines the level of workers’ earnings, and that national bargaining is of little importance. Nothing could be further from the truth. Local bargaining and national bargaining are the two legs on which workers walk, and a man with only one leg hardly walks faster or more strongly then a man with two. National negotiations do fix the “floors” to earnings:

... but these “floors” have the unique property that, when they are raised, the ceilings go up as well. An increase in wage rates secured by national negotiation will, in practically every case, raise levels of earnings throughout an industry, by however these levels may already exceed the levels of wage rates. National wage negotiation, although it is so largely concerned with the fixing of “unrealities”, is a powerful instrument for jacking up the entire edifice of earnings. [12]

And two other experts conclude, “It seems clear that an incomes policy directed at wage rates would have a considerable effect on wage earnings”. [13]

Hence an incomes policy will have to aim at restraining both unions in national bargaining and shop stewards in plant bargaining.
 

Keynote settlements

The impact of national bargaining over wage rates is of particular importance in certain instances. In any year the size of national settlements – and thus of local settlements too – is conditioned to quite a considerable degree by the success or failure of certain key wage claims. There is a strong case to be made for the proposition that certain settlements in any one year determine (within limits) other settlements – these “keynote settlements” set a trend which other employers then tend to follow, since workers deprived of rises that other workers are receiving naturally tend to become more militant (or “disturbed”, as Aubrey Jones put it). Sometimes this can be to the advantage of the unions, but sometimes it is certainly not:

The small average size of subsequent wage increases in 1958 and much of 1959 seems to have been in large measure due to the psychological climate created by the failure of the bus strike. It is true that unemployment was rising throughout 1958, and this might have been expected to moderate wage increases anyway. On the other hand, retail prices rose rapidly during 1957 and the first half of 1958, and this might have been expected to make the unions more militant in their attempts to restore the real value of wages.

It seems quite legitimate to infer from this that it may be possible to influence the size of keynote settlements, and hence of the succeeding wage round. [14]

And from what happened in 1958 it is clear how this “influence” is exerted – by a deliberate government effort to defeat a strike. And if in 1958 the London busmen’s wage claim was a “keynote settlement”, it seems that the recent government showdown with the railwaymen (in February 1966) was intended to serve exactly the same role. As the Economist put it:

The only way to achieve an incomes policy in 1966 is going to be by outfacing the trade unions on some big national wage struggle, in the same way as Mr Amory and Mr Macleod achieved about 18 months of effective incomes policy in 1958-59 by outfacing Mr Cousins’s London bus strike in May 1958. [15]

And in a similar vein a Financial Times editorial entitled Wage Policy On Trial stated, “With the railwaymen, the electricity workers and the dockers, the government will be forced to set an example”. [16]

As, however, the second base of workers’ power is in the factory organisation, we shall now turn to the problem of the role of the shop stewards, and to the question of how the government, the employers and the trade union brass will attempt to deal with them in imposing the incomes policy.

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Notes

1. Even here there is a small amount of wage drift, resulting from the fixing of piece-rates in the situations where they do apply, from more liberal grading of workers, etc.

2. Ministry of Labour, Statistics on Incomes, Prices and Employment, December 1964, Table B12.

3. L.A. Dicks-Mireaux and J.R. Shepherd, The Wage Structure and Some Implications for Incomes Policy, Economic Review, November 1962, p.42.

4. L.A. Dicks-Mireaux and J.R. Shepherd, The Wage Structure, p.42.

5. That wage drift does push up wage rates is clear from the following table:

Whereas the rate of increase of hourly wage rates reached its peak in 1961 and its lowest point in 1959 and 1963, the rise in weekly earnings reached its peak in 1960 with lowest points in 1959 and 1962. Thus changes in weekly earnings (and in wage drift) appear generally a year earlier than changes in wage rates. The drift, therefore, although smaller than the rise in basic rates, accelerates the rise in basic rates. The same causal relationship between wage rate and wage drift was found in a sample of 45 firms in the engineering industry. See S.W. Lerner and J. Marquand, Workshop Bargaining, Wage Drift and Productivity in the British Engineering Industry, Manchester School of Economic and Social Studies, January 1962.

6. National Board for Prices and Incomes, Remuneration of Administrative and Clerical Staff in the Electricity Supply Industry, Cmnd 2801, October 1965, p.14.

7. National Board for Prices and Incomes, Remuneration.

8. K.C.J.C. Knowles, Wages and Productivity, in G.D.N. Worswick and P.H. Ady (eds.), The British Economy in the 1950s (London, 1962).

9. C. Clark, The Conditions of Economic Progress (London, 1950), p.460.

10. H.A. Turner, Wage Policy and Economic Development (Manchester, 1962), pp9-12. See also T. Cliff, The Economic Roots of Reformism, in A Socialist Review, pp.48-58.

11. National Board for Prices and Incomes, Pay and Conditions of Service of British Railways Staff, Cmnd 2873, January 1966, pp.32-33.

12. K.G.J.C. Knowles, Wages, pp.524-525.

13. L.A. Dicks-Mireaux and J.R. Shepherd, The Wage Structure, p.38.

14. M. Stewart and R. Winsbury, An Incomes Policy for Labour, Fabian Tract 350 (October 1963), p.23.

15. Economist, 15 January 1966.

16. Financial Times, 10 January 1966.

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Last updated on 19.4.2003