Once again, the much told fact has been reiterated: Workers get a thinner slice of pie. ILO's Global Wage Report 2012/13: Wages and Equitable Growth
records the fact. The bigger slice is always for capital. This is the
rule, and the rule was enacted and being implemented by capital. There
is no division of power; although capital markets the power-division
formula in democracy market.
An amalgamation of crises, especially financial and
economic crises in the advanced capitalist countries have intensified
capital's war against labor. One of the gains by capital in this war is
labor's declining share in income. The ILO report finds: “ Workers get a
smaller share of GDP, as a bigger slice goes to capital income.”
Capital income shares increased in a majority of countries. In China ,
wages tripled over the last decade, but GDP grew at a faster rate than
the total wage bill. This surge cut down the labor's share.
In 16 developed economies, the average labor share
dropped from 75% of national income in the mid-1970s to 65% in the years
just before the economic crisis, and in 16 developing and emerging
countries, it decreased from 62% of GDP in the early 1990s to 58% just
before the crisis.
Labor's declining share in income means labor is
paid less for its necessary labor time, and less payment for necessary
labor time means labor is pressed down or squeezed out more for more
profit by capital, which is labor's increased hardship, deprivation,
suffering. Then, labor is dictated to keep silent. And, this is the
democracy capital practices. A real capitalist democracy!
To put it point blank: It's labor's starved,
half-starved days, untreated diseases, degrading housing condition, more
work, less rest, more uncertainty, less security, more indignity. This
puts pressure on labor, weakens labor's bargaining power. So, the ILO
report finds: “W age growth suffered a double-dip in developed
economies.”
Between 1999 and 2011, the report tells, average
labor productivity in developed economies increased more than twice as
much as average wages. In a number of larger economies including the US ,
Germany and Japan wage growth lagged behind productivity growth.
In Germany , average wages declined in spite of
positive average labor productivity growth in the years 1999–2007. In
2011, hourly wages were only marginally (0.4 percent) above their 2000
level while hourly labor productivity had grown by 12.8% over the same
period. Real monthly wages remained flat although labor productivity
soared by almost a quarter over the past two decades.
Citing S. Fleck, J. Glaser and S. Sprague's “The compensation–productivity gap: A visual essay”, in Monthly Labor Review
(US Bureau of Labor Statistics, Jan. 2011) the ILO report says: The gap
between hourly labor productivity and hourly compensation growth
contributed to a decline in the labor share in the US, where real hourly
labor productivity in the non-farm business sector increased by 85%
since 1980 while real hourly compensation increased by only around 35%.
In the UK , despite “productivity gains real average wages declined
sharply”.
The declining trend is also “amazing”. In a number
of countries including Greece and a number of new EU member-countries,
wages declined considerably more than labor productivity.
Lower wages
Large numbers of employees are getting lower wages,
finds the report. The reasons include reduced working hours and less
overtime.
Companies in several countries have reduced
employees' working time: Three or four-day weeks have replaced five-day
week, daily hours have been reduced, and even plants have been shut down
for weeks or months.
Reducing working hours is no kind-heartedness of
capital. The same is with less overtime work. The measure has been taken
to avoid lying off labor as lying off labor creates risky situation for
capital, especially during the period of increased social tension.
Threat to capital's political instability increases.
“Real average wage growth”, the ILO report finds,
“has remained far below pre-crisis levels globally, going into the red
in developed economies, although it has remained significant in emerging
economies…. Omitting China , global real average wages grew at only 0.2
percent in 2011, down from 1.3 percent from in 2010 and 2.3 percent in
2007.” This is the hard fact of 0.2 percent, and the fact turns harder
if one casts glimpses on the company, especially bank balance sheets of
loss and profit. The sheets show a higher profit, higher dividends.
In developed economies, wages suffered a double dip;
in eastern Europe and central Asia, real wages contracted severely in
2009; in the Middle East, real average wages appear to have declined
since 2008; and in Russia , the real value of wages collapsed to less
than 40% of their value in 1990s. It took another decade before the
Russian wages regained its initial level. In terms of real value of
wages, is it a decade lost in Russian capitalist wilderness?
In India , wage trends appeared “somewhat unclear”,
as the report observes. It says: “[R]eal wages declined in a majority of
recent years, shrinking the purchasing power of wage earners. This
would explain the many concerns expressed by workers in India about
rapidly increasing prices, particularly food prices. The trend, however,
is surprising in the light of the country's rapid economic growth over
the last decade.”
In a number of Arab countries, the Arab Spring
“seems to have prompted [...] to make further increases in wages for
local people working in the public sector. [But in] the private sector,
minimum wages and collective bargaining are underdeveloped in the Arab
region.”
Wage-productivity gap
The wage growth-labor productivity growth gap, the ILO report finds, is widening.
The fact turns out: Labor is made to move wheels
with more speed, move its limbs and brain faster, stretch its muscles
further but the number of coins that are thrown down on its frail hands
increases with a slower speed. The gap widens.
When necessary labor time is squeezed down further,
wheels are turned speedier, and labor's bargaining power is weakened,
the crueler reality declines to hide. It gets exposed. It's hard time
for labor, a time of intensified exploitation of labor, a time for
higher profit by capital. It's not “equitable growth”, the ILO report's
2012/13 edition looks at. So, the academic parlance emerges: “working
poverty”.
But there is cheap labor: Workers in the Philippine
manufacturing sector were paid $1.40 for every hour worked. It was less
than $5.50 in Brazil , $13 in Greece , $23.30 in the US , about $35 in
Denmark .
A treacherous space is there. “Throughout the crisis
wages continued to grow in Latin America and the Caribbean, Africa and
Asia .”
Growth in wages in Latin America and the Caribbean,
Africa and Asia will not reach the level in Europe and the US in
near-future. So, there will be scope for threatening labor in these two
continents, there will remain space for bargaining with it, and there
will be profit.
IMF intervention
In Greece , the report notes, wages were growing
ahead of productivity before the crisis. But, average wages were forced
down by austerity programs. However, in 2010-2011 cumulatively it fell
down close to 15%. The minimum wage has been severely cut, losing 22
percent of its previous value, informs the report.
“This change was made on the request of the European
Central Bank, the European Commission and the IMF as a condition for
giving the Greek Government access to bailout funds from the European
Financial Stability Facility (EFSF).” The report cited The IMF's advice on labor market issues ,
IMF Fact sheet (http://www.imf.org/external/np/exr/facts/pdf/labor.pdf
[17 Sep. 2012]): “Wage cuts were necessary if the country was to regain
competitiveness and growth.... The IMF also considered that the minimum
wage in Greece was substantially higher than in other developed
economies, even though ... it was not out of range.”
Referring the case of Portugal the report says: In the country, “access to EFSF came at the condition of a minimum wage freeze.”
In Serbia and Albania , the report says, “real wages
fell in spite of positive labor productivity growth, a reflection of
the freezing of nominal wages in the public sector.”
Citing M. Arandarenko and S. Avlijas' “Behind the
veil of statistics: Bringing to light structural weaknesses in Serbia ”
in V. Schmidt and D. Vaughan-Whitehead (eds): The impact of the crisis on wages in South-East Europe
(2011) the report says: “In Serbia, an agreement with the IMF signed in
April 2009 included a commitment by the government to keep public
sector wages and pensions frozen in nominal terms in 2009 and 2010 – as a
result of which real wages in the public administration declined. This
measure came with a ban on new employment in the public sector.
Similarly, on the advice of the IMF, budgetary restrictions on wage
growth in the public sector have been introduced in Albania .”
The IMF's wage-freezing “story” is told, at least for now.
Space for capital
It's preached: companies need breathing space –
scope for making profit – in times of crisis. So, an arrangement was
imposed on labor: work sharing.
Many companies, the report finds, have adopted new
working practices, and labor's hourly wage rates were changed. Brains in
the moneybag of capital have not suggested reducing profit rate.
Citing ILO's Decent world country profile: Ukraine (Geneva, 2011) and G. Kulikov and V. Blyzniuk's Impact of the financial and economic crisis on wages, income distribution and the tax system
(Budapest, 2010) the report says: In Ukraine, “[m]any employees had to
go on unpaid leave, especially in the industrial sector while others saw
their basic wages frozen and their bonuses cut.” The Ukraine labor has
experienced the award of formally resorting to open market its red
turned white party bosses promised.
However, the reality emerges: capital finds its breathing space by further and further encroachment of labor's breathing space.
Capital's increased share
The report says: “The mirror image of the fall in
the labor share is the increase in the capital share of income (often
called the profit share), which is measured most frequently as the share
of gross operating surplus of corporations as a percentage of GDP....
[I]n advanced economies, profits of non-financial corporations have
increasingly been allocated to pay dividends, which accounted for 35
percent of profits in 2007 and increased pressure on companies to reduce
the share of value added going to labor compensation.”
The report shows: In many countries, there is a
long-term trend towards labor compensation's falling share and profit's
rising share.
Citing studies/reports including OECD's Divided we stand: Why inequality keeps rising ( Paris , 2011) and J. Roine and D. Waldenström's “On the role of capital gains in Swedish income inequality” (in Review of Income and Wealth ,
Vol. 58, No. 3, 2012) the report said: In the period 1987–2008, a large
part of the increased surplus of corporations went into boosting the
dividends to shareholders. In France , total dividends increased from 4%
of the total wage bill in the early 1980s to 13% in 2008. In the US ,
three-quarters of the increase in gross operating surplus went into the
payment of dividends. The greater concentration of income with capital
instead of labor, booming dividends have often contributed to higher
overall household income inequality.
No interpretation is needed. “Truth needs no flowers of speech”, writes Pope.
Void capitalist globalization
Capitalist globalization was hawked vociferously by
mainstream. But, void promise by capitalist globalization has been
exposed. Financialization is actually gambling with incapacity by a few
that savages broader society. To labor, capitalist globalization is a
savage fact. Capitalist globalization-lords delivered sermon on benefits
of trade globalization, expansion of financial markets, etc. But,
reality has exposed those lies.
“The drop in the labor share is due to technological
progress, trade globalization, the expansion of financial markets, and
decreasing union density, which have eroded the bargaining power of
labor”, says the report. “Financial globalization, in particular, may
have played a bigger role than previously thought.”
Citing D. Rodrik's 1997 work Has globalization gone too far?
(Washington DC, Institute of International Economics) and Ö. Onaran's
“Globalisation, macroeconomic performance and distribution” in E. Hein
and E. Stockhammer's (eds) A modern guide to Keynesian macroeconomics and economic policies (2011) the report says: “[F]inancial globalization has probably weakened workers' bargaining position.
In developed economies, the report says, “global
financialization contributes 46 percent of the fall in labor income
shares, compared to contributions of 19 percent by globalization, 10
percent by technology and 25 percent by changes in two broad
institutional variables: government consumption and union density. ...
[F]inancialization, globalization and technological progress have all
grown in magnitude over time, thus contributing negatively to changes in
labor income shares between the two periods.”
The working poor
“One of the key findings”, the report says, “is the
growing inequality in income, in terms of functional and personal income
distribution.”
“[M]any waged and salaried workers in developing
countries are in fact living with their families in poverty”, says the
report. Out of about 209 million wage earners in 32 developing countries
from 1997 to 2006, about 23 million were earning below US$1.25 a day
and 64 million were earning less than US$2 per day, the international
poverty lines for 32 developing countries.
An “interesting” relation is mentioned in the
report. “A lower labor share”, the report says, “was associated with a
higher share of net exports in all countries. A 1 percent lower labor
share was associated with higher rates of investment in GDP in nine
countries as well as in the eurozone group, but had no perceptible
effect on investment in five emergent economies and the US . The
positive effect of lower labour share on exports is perhaps not
surprising, given the close relationship between the concept of the
labour share and the concept of unit labour costs. A decline in unit
labour costs is often seen as an improvement in external cost
competitiveness [...] lower unit labor costs are [...] frequently
advocated as a means of restoring economic growth and promoting
employment. This is [...] the rationale behind the decision in Greece to
reduce the minimum wage by 22 percent, with a further 10 percent cut
for young workers, together with a reduction in non-wage costs (social
security contributions) by 5 percentage point. Similar [...] measures
were also part of IMF programs in Portugal , Serbia and Latvia .”
The fact shows capital's efficiency in imposing
burden on labor: To sharpen competitive edge, press down, squeeze out
labor, ask labor to “sacrifice”/“contribute”, which is actually
appropriation. To ensure the “sacrifice”/“contribute”, there is force,
the force of political mechanism. And, to hide the act of appropriation
and use of force, there are crude jargons “innovated” by a section of
dignified academic brains.
The reality of shrinking income, increasing
hardship, growing poverty of the labor, and rising profit of capital
finds Guy Ryder, ILO Director-General, write in the Preface of the
report: “On a social and political level this trend risks creating
perceptions that workers and their families are not receiving their fair
share of the wealth they create.”
In developed economies, according to the report,
unemployment rose from less than 6% to more than 8% of the labor force.
The figure was double-digit in Greece , Ireland , Portugal and Spain .
Worldwide unemployment has gone up by 27 million since the start of the
crisis, bringing the overall number of unemployed to about 200 million
or 6% of the global labor force.
In this saturnalia organized by capital, shall labor's discontent and rising appear immoral and illogical?
