Chris Bambery looks at declining real wages and increasing temporary work in Britain, as the UK’s Thatcherite elite see Britain’s future as competing with the wages of BRIC economies.

Feeling short of money? You should. The most recent figures on pay reveal that real average earnings are down eight percent on their pre-recession high. The Office of National Statistics says average pay grew by just 1.5 percent over the last year, well behind inflation (median earnings have not risen at all since the last four months of 2010). This is before tax increases bite, it adds.

My favourite Thatcherite, City AM editor Allister Heath, writes:

This is terrible news for those affected – but it also implies that labour has become relatively cheaper, which helps to explain why private sector jobs have been created in the past two years. Labour costs, using the Eurostat measure, including non-wage costs, rose just 0.6 per cent year on year in the second quarter, down from 1.2 per cent at the start of the year, compared with a rise of two per cent for the Eurozone. [Michael] Saunders [of Citibank] calculates that UK labour cost growth averaged 4.8 per cent per year over 2000-07 and 2.4 per cent per year during 2008-11, versus 2.9 per cent and 2.6 per cent respectively for the Eurozone.

He continues:

British labour costs – which had risen even faster than those in the Eurozone – are finally readjusting to the reality of a smaller economy and intense global competition. Eventually, real terms wage falls will stop. But it remains an open question whether the UK economy will be able to deliver decent real wage growth for the vast majority of its workers once again – or whether we will fall into the US trap, with millions facing permanent stagnation at best. Forget about all the trivia: that is the political question of the next decade.

The Centre for Economic and Business Research predicts that households should see a rise in real incomes from next year as inflation slows and there is some increase in pay. The rise in 2013 will be the first since the onset of the financial crisis, though it warns that as inflation rises wages will start to fall again as early as 2016.

In simple terms the rate of exploitation, the percentage of our work going to profits rather than wages, is increasing. The drop in UK labour costs can help offset corporate Britain’s low productivity in relation to its rivals. Making us work more for less is a crude but effective response to the recession.

Another way of increasing the rate of exploitation is through fear. Unemployment means people fear losing their jobs as benefits are cut – making workers prepared to hang on despite falling wages and worsening conditions. So too does the increase in precarious work: what were once permanent jobs are being replaced by unpaid, part-time or temporary workers. Therefore if you have a permanent job you are intimidated into holding onto it and if you have precarious work you are desperate to get whatever work you can.

A survey of recruitment agencies reports that in August there was a sharp rise in the number of people in Scotland in temporary jobs. The rate of growth was the fastest in four months and much stronger than the UK average.

The same survey also recorded a second consecutive monthly fall in permanent placements.

The rate of decline was the fastest recorded since last December. The increase in precarious workers – those doing agency work, in part-time or temporary jobs, interns, those on ‘job experience’ schemes and those who are self-employed because they can’t find steady jobs – helps explain why private sector unemployment has not risen as sharply as might have been expected. It increases the pressure to accept lower wages, unpaid overtime and much more and means because labour costs are lower, employers can afford to hang on to employees rather than sack them.

For the likes of Allister Heath, all of this is a necessary part of trying to lower wages to be competitive with the emerging BRIC economies – Brazil, Russia, India and China. It’s difficult for neoliberals like Heath – who willingly put the future of humanity into the hands of corporate giants – to see anything other than competing with impoverished Chinese workers as a viable future for the British economy. This is what “readjusting to the reality of a smaller economy and intense global competition” means.

For those of us who believe human beings should democratically control their own economy and therefore their own destiny, we should be clear: no race to the bottom. Democratic economic planning to create jobs, protect the environment and meet human need. Take the power out of the hands of the stinking rich and start organising our economy for people not profit.

From the ISG site