UNITYblog EDITORIAL: Wages cuts will lead to higher unemployment

In Gordon Campbell's latest article The risks of cutting wages during this recession (5 May) he quotes Paul Krugman writing in the New York Times: Suppose that workers at the XYZ Corporation accept a pay cut. That lets XYZ management cut prices, making its products more competitive. Sales rise, and more workers can keep their jobs. So you might think that wage cuts raise employment — which they do at the level of the individual employer. But if everyone takes a pay cut, nobody gains a competitive advantage. So there’s no benefit to the economy from lower wages. Meanwhile, the fall in wages can worsen the economy’s problems on other fronts. And again: In particular, falling wages, and hence falling incomes, worsen the problem of excessive debt: your monthly mortgage payments don’t go down with your paycheck. America came into this crisis with household debt as a percentage of income at its highest level since the 1930s. Families are trying to work that debt down by saving more than they have in a decade — but as wages fall, they’re chasing a moving target. And the rising burden of debt will put downward pressure on consumer spending, keeping the economy depressed. The end result more unemployment, not less. What works for one employer, when pursued by all will only lead to the deepening of the recession and worse pain for working class people in the form of mass job losses. Individual employers will act as their logic dictates, which means it will be up to workers and the union movement to collectively fight to maintain and increase wages. As well as pushing for government social spending directed towards modest income people, and intervention in the banking system to reduce the burden of mortgage repayments. What's needed to fight the recession is a redistribution of wealth from the profiting class to workers. The only solution, therefore, for workers is struggle. How successful we can be will depend on the level of nationwide coordination. This is the role of the union movement and the broad left. See also:

• The growing rash of lockouts must be nipped in the bud
• Calling for increased productivity right now is madness

MIGRANT WORKERS, THE ECONOMIC CRISIS AND THE UNIONS

Public Meeting: 7.30pm Tuesday 7 April Auckland Trades Hall, 147 Great North Rd, Grey Lynn Recently there have been decisions by companies to make NZ workers redundant while continuing to employ migrant workers on temporary visas. There have been calls by both the Labour Party, National and some unionists for these migrant workers to be laid off first. The immigration service has revoked the work visas of some workers who kept their jobs. Migrant advocates have raised concerns that racist sentiments are being fostered and ask the question why migrant workers shouldn’t have their rights protected. New Zealand-born or permanent residents ask why they should be sacked when temporary visa holders keep their jobs. This raises questions on how unions should be approaching migrant workers when there may be conflicting claims for support from different groups of workers who are their members. Addressing these questions will be speakers involved in the union movement and in advocating for migrant workers. These include:

• Laila Harre, National Secretary of the National Distribution Union
• Dennis Maga, Migrante Aotearoa
• John Minto, Organiser, Unite Union
• Mike Treen, Global Peace and Justice Auckland (Chair)

For more information contact Dennis Maga, 021 971 070, dennis.maga@yahoo.co.nz

Financial crisis should spur discussion of economic alternatives

Workers at Sanitarios Maracay in Venezuela meet to discuss the running of the factory. Workers make decisions collectively and elect workers to leadership positions.

by John Minto from The Press 21 October 2008 You're unlikely to have heard of Sanitarios Maracay but by the end of this column I hope you'll take the time to find out a bit more. The international economic crisis has been in the headlines for two months now. For the most part, New Zealand has watched developments from the sidelines of a crisis centred in the arcane world of shareholdings and risk, confidence and speculation, guessing and gambling.

Continue

See also

• INVEVAL – leading the struggle for workers’ control

NZ jobs must come before free trade

RAM - Residents Action Movement Media release 17 April 2008 "It is obvious that free trade is devastating New Zealand's manufacturing sector and its jobs," said Oliver Woods, co-organiser of RAM - Residents Action Movement. "The latest casualties have come with Fisher & Paykel's decision to close its plant in Dunedin as a consequence of New Zealand's free trade deals with China and Thailand. The corporation will relocate the work overseas to low-wage economies that return higher profits to an already-profitable business that made $61 million after tax last year. " "The NZ government signs a free trade deal with the dictatorial Chinese regime and then stands idly by as Kiwi families struggle with job losses and rising food prices. Meanwhile hardworking taxpayers fund cabinet ministers going on cocktail-fueled free trade missionary expeditions to distant capitals. There is something wrong with this picture!" said Mr Woods. "Workers are caught between the big corporations like Fisher & Paykel who put greater profits before job security, and the big political parties like Labour and National that worship at the altar of free trade, the almighty dollar and radical free market economics. Fisher & Paykel's behaviour is an indicment on the corporate politics of this country!" "RAM stands with the workers who are going to lose their jobs in Dunedin, and their families and their community who are going to suffer with them. New Zealand must put people before profit, and allow workers the dignity of stable, well-paid jobs," said Mr Woods. For more information, contact: Oliver Woods Co-organiser of RAM - Residents Action Movement 021 072 4647 oliver.woods@gmail.com

Financial crisis should spur discussion of economic alternatives

by John Minto from The Press 21 October 2008 You're unlikely to have heard of Sanitarios Maracay but by the end of this column I hope you'll take the time to find out a bit more. The international economic crisis has been in the headlines for two months now. For the most part, New Zealand has watched developments from the sidelines of a crisis centred in the arcane world of shareholdings and risk, confidence and speculation, guessing and gambling. This is John Key's world where reckless speculation makes you wealthy but honest labour makes you poor. His Merrill Lynch company is now at the front of the queue for billions in corporate welfare. The most insightful statistic which backgrounds the crisis in the US goes as follows: In 1980 the value of US financial assets (bank deposits, government and private sector securities and shareholdings) was 120 per cent of gross domestic product (GDP). By 2007 this had grown to 356% of GDP. Thus the value of financial assets had bubbled far beyond the real value of goods and services produced by wage and salary earners. It was value based on financial hot air but like an insane pyramid-selling scheme the value grew as speculation and greed were fuelled by US government-sanctioned stupidity. As the artificial bubble collapses the crisis will shift from financial markets to the real economy. Early warning signs here have been the collapse of 27 of our 70 finance companies and falling house values. However, when commentators and politicians talk about hard times ahead it will not only be smaller investors with some spare cash who will be hit. The greatest impact, as always, will be on wage and salary earners. These are the people who create the only real wealth, as measured by GDP, but are now being asked to bail out the parasitic financial markets. It's another case of no gain without pain as Minister of Finance Roger Douglas said back in the 1980s. The pain then was reserved for the most vulnerable workers while the huge gains were reserved for a small wealthy elite. This time round will be no different. It will be the most vulnerable who suffer the most. Low-wage workers will be laid off as production declines, people conserve their cash and the service sector takes big hits. With such a dramatic crisis unfolding the level of debate has been abysmal. Nowhere in the mainstream media is there more than the most superficial criticism of the markets. The prevailing mood seems to be that once this crisis is over things will more or less return to normal with the current economic structure essentially unchanged. More government regulation will be proposed but not much more will change. Back in the 1980s Douglas also told us ad infinitum there is no alternative to the free market. This is as untrue now as it was then. At least two of the minor parties are promoting real economic alternatives for New Zealanders to consider and these deserve a good airing during the election campaign. The Workers Party and RAM (Residents Action Movement) are fielding candidates around the country. They both offer socialist alternatives to the capitalist system of running an economy. The Workers Party slogan is Workers should be running the country while RAM has a whole host of policies to redirect the economy so it works for people rather than market mandarins. Its worth spending 11 minutes to check a video clip on the Workers Party website which focuses on a company called Sanitarios Maracay in Aragua, Venezuela. Its a ceramic bathroom products factory which the owner tried to close down. Instead, the workers occupied the factory and restarted production. They have taken on a Herculean task. In the middle of a capitalist society it will be almost impossible for the factory to survive because it needs to get raw materials and find markets which are themselves controlled by other capitalist companies who are determined to see the workers' venture fail. The factory works with a flat structure whereby the workers themselves make decisions about all aspects of the production, distribution, pricing and marketing. The workers say it is producing for human need rather than private greed or government directive. The workers are asking the Venezuelan Government to nationalise the company so they can continue to operate it as a worker- controlled business. New Zealand workers are no less capable of running a factory as a democratic enterprise. The next time Fisher & Paykel wants to close a plant here we know there are alternatives. The only benefit of the global financial meltdown would be if it spurred a real discussion of economic alternatives. Let's be brave enough to listen to the workers at Sanitarios Maracay.