Thursday 26 February 2009

Shorter working hours and government income compensation - a pro-worker stimulus plan?

by Auckland union activist Mainstream news editorialists are saying that we must spend to get the economy going again. Cutting workers wages and hours without compensation (which is the same as a wage cut) will only further decrease the spending power of working people, therefore making the recession worse. History shows that in the Great Depression unemployment only started to lessen when working people joined unions in mass numbers and won major wage increases. But the major employers will refuse this solution because it would mean cuts to their profits. I feel the Job Summit should be called the "Profit Summit". Falling profit rates, due to the recession, not job losses, will be the real concern of the majority of those attending the Job Summit. This is shown by the guest list which is overburdened with representitives of big business. So why have unions been invited? The NZ Herald has made it clear that employers and the government want a partnership agreement with unions for wage restraint, claiming that this will save jobs. The total opposite is the truth. Declining incomes for workers is more likely to result in job losses than declining incomes for shareholders. This is because for working people, particularly those near the bottom, all their income goes out straight away to buy the necessities of modern life. This creates a demand for goods and services, which creates jobs. Shareholders and investors on the other hand are more likely to sit on their earnings, particularly during a recession. As the NZ Herald on Saturday acknowledged in their lead editorial: it is the "lack of confidence" from investors that is fueling the credit crunch. Instead of wage restraint, Andrew Little's idea of a shortened work week, with government compensation for lost earnings is a better idea. In fact, done right it may not even cost the government that much. For instance, where I work, because of falling trade, workers have already agreed to the employer's demand to go to a 32 hour week, or else the employer said, he would start layoffs. The workers agreed to this drastic drop in their incomes, rather than see their mates thrown completely out of work. I think that these workers should be compensated for their lost income with a tax break on the four remaining days income, equal to their lost day's pay. While this will see a drop in the tax take from these workers, it is not the double tax loss caused by them not paying any income tax at all if they were unemployed and drawing down an unemployment benefit (a negative tax situation). The last government freed up $2 billion to prop up failing investment companies and banks. Will this work? I don't think so, because not only is this crisis caused by the credit crunch it has coincided with a commodity crisis (an overabundance of manufactured goods due to high productivity matched with low wage levels.) Investing in more productive capacity will never fix this. Instead of spending $20 billion in an effort to bolster falling profit rates in the private sector, the government should hold onto this money to pay for what it is supposed to be used for: healthcare, education pensions, necessary infrastructure – all of which is being starved of money, to protect the incomes of the rich.

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