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Wednesday, June 07, 2006


Pay rises

I think that it is worth mentioning a few things that are always missed, or misrepresented, when the media, of all stripes, covers pay disputes.

First. A 5% a year pay rise is not the same as a 15% pay rise over three years. If I am paid £100, then a 15% over three years settlement will result in me being paid £115 at the end of that three year period. If, over those three years, I had received a 5% per year pay rise then, after the first year I would be paid £105, after the second £110.25, and after the third £115.76. This might seem small, but then the figures of £100 and 5% was chosen for its simplicity, not for their correspondence with that which is actually existing.

Second. We must remember that when an employer is describing the offered pay settlement they will use a linguistic formulation that makes this settlement appear as generous as possible. Sometimes this will be bald lies. Sometimes this will be sleight of tongue, encouraging a belief in the equivalence between, say, 5% a year and 15% over three years. This sleight of tongue can be seen when the employer describes a deal as taking place over ‘over X years’. In these cases, the employer appears most generous when it manages to make X as small as possible. But a deal over three years is a deal over three years, is it not? Well, both the number, size and the timing of the instalments of the pay increase can be varied. Let us, for the sake of argument, agree that there will be three pay increases, of less than 5% remember, in the pay settlement in question. The workers would be best served by an immediate instalment, a second after twelve months and a third after a further twelve months. This is three annual instalments. But if it were so, do you not think that the employers would describe it as being ‘over two years’, as there is only twenty four months between the first instalment and the last? So, what does ‘three years’ mean to an employer when settling a pay dispute? Most likely it means something close to 3 years and 364 days before the full 15% is settled.

Third. A 15% pay rise is not a 15% pay rise. At least, what I mean to say is that ‘equal’ pay rises lead to increasing inequality. If I earn £1000 and you earn £100 – and a ten-fold difference in wages in the same organisation is hardly unknown – then I am paid £900 more than you when measured in the fluid absolute that is called money. If we both receive a 15% pay rise, and what can be more egalitarian than that, then I will be paid £1150 and you will be paid £115, which is a difference of £1035. There is still a ten-fold difference, true, but if this is a real wage increase, i.e. unless price inflation is also 15%, then the inequality of these two positions has grown. In as that gap increases from £900 to £1035 the gap in spending power, owning power, and in a capitalist society, social, cultural and political power, increases. This, of course, is not a description of the way that wage increases actually happen. No, because in a great number of cases the wage/income increases enjoyed by the wealthiest are far greater, in terms of yearly percentages, than those won by the poorest. This needs to be reversed; we need to see more ‘income freezing’ of chief executives and more massive wage increases for the poorest. For a democracy to be worthy of the name, the political actors need to be as equal as possible, else it is simply a masquerade behind which the powerful can hide their operations.

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