Wednesday, 20 June 2012

Paying the price

The Conservative-led government has started a number of hares running on pay, pay bargaining and security of employment.

First, a number of Conservative MPs started a campaign to scrap the National Minimum Wage. Currently, the government appears to have no appetite to pursue this.

Secondly, David Cameron commissioned Adrian Beecroft, a Conservative Party donor and venture capitalist – whose investments include the controversial high-interest pay-day lender Wonga, whose loans can carry an interest rate of more than 4000% –  to propose reforms to employment law.

Beecroft made proposals to scrap ‘unfair dismissal’ and give powers to employers simply to dismiss employees, for whatever reason, with minimal compensation.

Beecroft said "The downside of the proposal is that some people would be dismissed simply because their employer did not like them. While this is sad, I believe it is a price worth paying for all the benefits." Older readers will remember that it was Conservative Minister Norman Tebbitt in the 1980s who told us that “unemployment is a price worth paying.”

After considerable opposition from several employers’ organisations, it appears that the government is backing away from many of Beechcroft’s proposals, although it has doubled the time in employment before any claim for unfair dismissal can be made.

Thirdly, the government proposed scrapping national pay-bargaining to be replaced by workplace negotiations and the introduction of regional pay in the public sector. George Osborne instructed all the Independent Pay Review bodies to consider how they might do this.

In the UK, nearly a quarter of all people in employment have a job in the public sector – in the NHS, schools and universities, government departments and agencies, local councils. The local proportion varies considerably – more than 50% in Nick Clegg’s Sheffield Hallam constituency to less than 20% in my own constituency of Sheffield South East.

Any regional pay arrangements would inevitably exacerbate the North/South divide, as areas with higher unemployment would see wages falling in relative terms and, perhaps, in actual terms. Academic analysis of the data also shows that women in low-paid jobs in areas of the highest unemployment would be the hardest hit by such proposals.

In reality, although there are national arrangements and agreements for most public sector employees, these already provide for many local and regional variations. So, for example, teachers in London are paid more than teachers doing the identical job in Sheffield.

But, it also worth considering what actually happens when national agreements are replaced with regional and workplace arrangements.

-         After privatisation in 1996, rail industry earnings rates accelerated ahead of general earnings and by 2002 they were nearly 50% higher. Real earnings of train drivers moved ahead of general rail industry earnings throughout the period, and by 2002 they stood 80% above general manual earnings.

-         In the 1990s the Conservatives introduced local pay bargaining to the NHS. A review of the experience notes that this was not a great success, with evidence of significant additional costs in managing the process and massive increased complexity.

-         Local councils are free to set pay as they wish, but the vast majority choose to negotiate through the national arrangements. About 40 councils have local arrangements, but most still closely shadow national agreements and find little advantage in local variation. Between 2001 and 2008, pay under the national arrangements increased 26.5%, whereas local deals produced a 27.8% increase.

So, the evidence suggests that the government’s objective – cutting public sector pay, under the guise of being responsive to local employment markets – is unlikely to be realized by regional or workplace bargaining.

Opposition to these proposals has now come from Conservative and Liberal Democrat MPs in the North and in marginal seats. Nick Clegg’s recent opposition is a little surprising when one remembers that the Liberal Democrats opposed the National Minimum Wage and supported different Regional Minimum Wages.

So, the coalition now appears to be getting cold-feet about these proposals as well..

But, there are so many u-turns being made that it’s difficult to keep up.