Andrew Glynn

Thresholds: Worker’s Standards Still Cut

(July 1974)

From Militant, No. 214, 12 July 1974, p. 3.
Transcribed by Iain Dalton.
Marked up by Einde O’Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

With inflation running at 20 per cent a year or more agreements which tie wages to the cost of living may appear an excellent way of maintaining living standards. This seems to be in line with the TUC’s plan for wage bargaining after Phase Three ends in the autumn. The simplest arrangement would be for wages to rise by 1% for each 1% rise in the cost of living.

This amounts to a 1% “Threshold” with no initial wage increase, except presumably for groups of workers not covered by cost of living deals under Phase Three. It compares with the 7% initial increase, and the 7% threshold before rises in the cost of living triggered off wage increases, which were allowed under Phase Three. But whatever the details of such a scheme such deals are quite unsatisfactory for a number of reasons:

The Retail Price index used by the government to measure cost of living is quite inadequate as a measure of inflation for workers. For example, it leaves out interest which many workers have to pay on their HP or mortgage commitments: if interest rates continue to rise the real purchasing power of the wages of workers making such interest payments is reduced in just the same way as for any other rise in the cost of living. For example the weekly mortgage repayments on an average house bought in 1971 rose from about £8.50 per week in 1971 to about £11 by the end of 1973.
Since the Retail Price Index is published about one month after the prices are gathered it always lags behind the actual cost of living. When inflation is only a few per cent this hardly matters. But at present with inflation running at about 2 per cent per month a delay in compensating for cost of living rises of, say six weeks (allowing a couple of weeks for the firms to get around to paying them) means that real wages will be reduced by about 3 per cent throughout the period for which the agreement runs.
For most workers all the extra they receive under cost of living agreements will be taxed at the standard rate since the tax allowances are not raised. This means that a higher and higher proportion of their income will be taken in taxation. So that even if real wages, before taxation, were maintained by the cost of living agreements then real take-home pay will be falling.
No account is taken in cost of living agreements of reductions in living standards caused by cuts in the social services. For example the Tory public expenditure cuts of last December will mean a reduction in Government speaking on health, housing, education etc. of around £1.50 per week for a married couple with two children.

Since it is not the weekly wage packet which is compensated for by cost of living increases, but only wages paid for hours worked, the standard of living of many families will be reduced if there are less opportunities for overtime, or for the wife to do part-time work. Worst hit will be those families where a full-time breadwinner is thrown out of work – they will be hit again as unemployment benefit is whittled down by inflation.

Even the semi-official National Institute is forecasting that in the next six months unemployment will rise by about 100,000 more than the normal seasonal increase. And many predictions are of over one million by the end of the year.

The impasse in which British capitalists find themselves makes it all the more urgent for them to try and cut costs through rationalisations of old plant, redundancies etc. If living standards are held down all the extra productivity will go to profits; relatively to the capitalists, then, there is a reduction in workers’ living standards.

The union leaders must fight to defend their members living standards. They could, and should, demand that cost of living increases be paid six weeks in arrears; that they be based on Trade Unions’ own cost of living index, worked out by committees drawn from the movement. Real wage increases could be built in by demanding an initial increase plus full cost of living compensation.

But expenditure on the social services, tax allowances and overall policies to deal with unemployment and inflation lie outside collective bargaining. This demonstrates the limitation of Trade Union action to protect living standards in a period when the crisis is pushing the Government to use the weapons at the disposal of the state to hold them back.

The only lasting protection is action by the whole Labour Movement to ensure that the Labour Government does not bow to the dictates of capitalist logic, but implements a real socialist programme for taking over the major industrial and financial companies.

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Last updated: 8 August 2016