Britain - Labour, the union leadership and the bosses' drive against wages

Oct/Nov 1997

Over the past period, the share of the national income represented by the wages of workers in employment has been shrinking regularly while the share earned by the capitalist class has been going up in comparable proportions.

Given the alleged reduction of unemployment over the past few years, this trend should have been reversed. Yet it was not. Over the term of the last Tory parliament, for instance, the share of wages in Gross Domestic Product went down by 4% while that of company income went up by exactly the same amount. While net company profits went up by 58% and dividends by 103%, the total paid in wages - and this includes the fat cats' salaries - went up by just over 10%.

These figures illustrate graphically the wage squeeze that large sections of the working class have experienced. Certainly, one of the hopes that many Labour voters had in the May general election was that the Tories' defeat would put an end to this downgrading of wages. Yet stopping the capitalists' drive against wages is not and has never been part of Blair's agenda. Moreover there are signs today that far from slowing down, the bosses' drive to cut wages is being stepped up.

So far, the main method used by the bosses to reduce their wage bills has been through changes in the employment status of whole sections of workers, by contracting out work, generalising part- time employment and through casualisation. However, by and large, the wages of workers who retained full-time permanent status in large private sector companies were much less affected - although working conditions have worsened dramatically for them as well, particularly in manufacturing industries. For these workers, wages may have lagged somewhat behind inflation, though this was less so in more "sensitive" areas like the automotive industry, but there were few cases of outright wage cuts. Despite the low level of militancy, employers were still too wary of a backlash to push things that far.

Some of the latest pay deals, however, include unusual provisions for paying lower wages to new permanent recruits. The initial draft of one such deal, in a privatised railway company, even stated that new entrants were to be paid "according to market conditions". Although this company's management did eventually concede that they had to put a figure on new entrants' wages too, they must have thought they were just following Blair's lead in his campaign for a "flexible labour market"!

As to the union leadership, there are also indications that they are prepared to offer employers a helping hand to reach such deals, and more generally that they are volunteering to help them generate more profits - inevitably at workers' expense.

Subcontractors Ltd

The way in which more or less every employer has been reducing his wage bills up to now - and boosting his profits - was strikingly illustrated by the privatised public utilities. They simply slashed jobs and increased the workload of the remaining workers. However there comes a point where the limits are reached - often after the workforce reductions have resulted in serious accidents, like on the railways. If labour costs were to be driven down further, actual wage cuts were needed. And since the bosses did not dare to face a confrontation over this, they found many other indirect ways of achieving this.

The method most often used was subcontracting - i.e. cutting out a particular activity and selling it, usually together with its workforce, to another company which could then pay lower wages by ignoring the existing collective agreements.

From the mid-80s, the Tory governments provided a lead by implementing this method on a large scale in the public sector, through the coercive "compulsory competitive tendering" (CCT) in local government and other similar devices like "market testing" in the NHS and the civil service. And despite some resistance in the early days, local councils, including those controlled by the Labour party, proved keen to follow this lead and ruthless in implementing CCT. As a result, as many activities as possible were put up for sale to the lowest bidder, usually for an agreed period of one to three years. There was an exponential growth of "cowboy" companies taking over just about everything from cleaning to sophisticated laboratory testing on the basis of low bids on which they could only turn a profit by cutting all costs, and particularly wages.

Today, some years down the line, this process has gone a number of steps further, since an operation such as hospital cleaning, for instance, may be passing into the hands of the second, third or fourth different contractor - each time eroding wages and conditions still further. The much-publicised case of the Hillingdon Hospital cleaners is only one among many examples of this. In their case Pall Mall, the contractor, attempted to cut their wages by 20% and they were sacked after going on strike against this.

The TUPE (Transfer of Undertakings Protection of Employment) regulations, which were meant to protect workers' jobs and conditions against contractors, are continually being undermined despite the fact that this protection is so minimal. The only actual constraint on contractors is that they have to wait one year before going on the rampage - then they can just get the workforce to reapply for their jobs, on the basis of whatever new contracts they want. Only this year, in a court case conducted on behalf of St Helens Borough Council by none other than Cherie Blair, a new attempt was made to set a legal precedent nullifying TUPE. The council contracted in community care services which had been previously contracted out. The previous employer made the workers redundant and the council took them back on worsened contracts. The judge ruled in favour of the council, thereby offering any public sector employer a convenient trick to by-pass TUPE. Perhaps it was the effect of Mrs Blair, since another court ruled the same day, in another similar case, that this was illegal!

But even when TUPE is "respected", new recruits are always taken on with different and worse contracts. There are innumerable twists that the bosses can make in the subcontracting process to their own advantage. For example, this year at King's Cross Station in London Railtrack subcontracted platform cleaning to a company called Serco, passing on the few workers left in its own employ to the new company. But prior to this, in order to avoid having any further contractual obligations to full-time workers, Railtrack filled vacancies with agency workers, who were also taken on by Serco. But, because they were not covered by TUPE, just four months later these workers are now told that they have to work 20% more hours and take an 8% cut on their hourly rate.

Following the lead given by the state, large private companies have also been making an extensive use of similar methods over the past period.

For instance, the Ford Motor Company started outsourcing operations at least 10 years ago, by contracting out the cleaning in its plants. Formerly janitors were all Ford employees - workers who either too worn out to work the lines or had a medical restriction. They received the same rate of pay as line workers or slightly less. Today, the hourly rate of cleaners employed by the contract company, ISI, at Ford Dagenham is two-thirds the average rate on production lines. Likewise, when Ford outsourced its car seats to another company called Johnsons, the workers taken on at the new purpose-built plant on the Dagenham site were offered 80% of the Ford line rate. Further outsourcing continues, reducing Ford's costs and workers' wages, and allowing Alex Trotman the top Ford boss to boast in his annual report that "aggressive cost cutting" has put Ford into a position to improve its results for 1997.

Subcontracting has had a knock-on effect because more and more workers, having lost their jobs in the large companies, are now obliged to work for the copious number of small cowboy companies, which live off the odd contracts they grab here and there, all over the country. Jobs with such companies are more often than not short-term, to allow bosses to take advantage of the two-year deadline before which workers have none of the rights provided for by the employment protection legislation. In other words, subcontracting has added to the impact of the successive large-scale waves of redundancies in inflating the mass of short-term precarious lower-paid jobs.

Part-time work, full exploitation

Another device used by employers to push wages down, has been to force part-time status on large sections of workers. The Tory governments provided an incentive for this in the form of tax rebates on National Insurance Contributions and reduced employment protection below a certain number of hours. Since employers did not have to pay contributions - nor redundancy payments or maternity leave for that matter - on wages below the National Insurance threshold, there was an additional incentive for them to pay lower hourly rates for fewer hours. Besides, of course, part-timers did not have other option than to agree to work the overtime offered to them according to the needs of their employers.

The growth of part-time work has been a feature of the past two decades, with a sharp increase over the past four to five years. Overall, the number of full-time jobs has fallen by 20% over the last 20 years. Of all the jobs "created" between 1992 and 1996, 43% were part-time. Whereas in 1981, the 4.5m part- timers made up 21.2% of all employees, by 1991 they numbered 5.7m (26.4% of all employees). Today, the figure is close to 7m or 30% of all employees.

The bulk of part-time work lies in the retail, catering and cleaning sector. The main supermarket chains, including that of Labour's new-found peer, Lord Sainsbury, took a drastic step in that direction a few years ago, by imposing part-time contracts almost overnight on the vast majority of their workforce. But other sectors have also seen a sharp rise in part-time employment, particularly the post-office which is in the process of implementing a long-term plan aimed at having half of its workforce on part-time contracts.

Some production factories take on production workers on a part- time basis too. The Ford company began to do this about five years ago, employing workers on Mondays and Fridays, ostensibly to make up for absenteeism. While in practice these workers worked full-time - making up not merely for absenteeism but for a labour shortage which Ford was not prepared to meet through recruiting full-time workers - they received benefits, holidays, sick pay, etc.. corresponding to their contractual hours, hence providing a saving for the company and a straight rip-off for the full-time "part-timers". At the same time, this has become a standard filtering device for the company: part-timers are told they may be offered a full-time post eventually provided they have a good work and attendance record and prove "flexible" enough to management's whims.

The recent decision by British Telecom to recruit contractors and part-time engineers to repair faults was met with justified anger by the workforce. Not only has this company built up a cash mountain on 83,800 jobs cut over the last 4 years, but at the same time as it was announcing its intention to recruit part-timers, it was also declaring 1,300 skilled engineers "surplus workforce". Of course, recruiting part-timers on new contracts and cheaper rates would be a lot more profitable for BT than keeping 1,300 skilled workers on their present full-time rates. Predictably BT engineers subsequently voted five to one for strike action over this issue.

In June this year, an agreement was announced under the European Social Chapter (which the government has signed) to give part-time workers across the European Union legal rights to match those of full-time workers - although this still leaves out most categories of casual workers. Already in 1994, part-timers in Britain were granted the same statutory rights as full-timers to claim unfair dismissal and redundancy. However to date, 60% of British part-time workers do not get all the benefits full-timers receive - such as paid occupational sick leave, occupational pensions, paid holidays, etc.. In theory these directives are meant to legally bind employers to equalise part-timers rights (to become law in the next two years). In practice, as usual with this kind of directives, the absence of fast and effective redress means that many part-timers, particularly in the smaller companies, will not see much change in their conditions.

The many other wage-cutting tricks

The list of other tricks and fiddles used by companies to reduce workers' wages would be much too long for the scope of this article. We will therefore limit ourselves to two widespread, but very different examples.

Self-employment is a particular form of subcontracting, reduced to its bare bones, right down to the individual worker. In the mid- 80s, it was hailed as a blueprint for the self-sufficient society promoted by Thatcher's populist rhetoric and, initially at least, encouraged with various forms of tax incentives. At the time, there were plants in which redundant workers were "offered" their previous jobs back provided they agreed to work as self-employed. The advantage for the employers was that they no longer had to pay National Insurance or pension contributions, holiday or sick pay, and not even the going rate for the job. There was no question of overtime premiums or constraints in working hours while health and safety regulations were untested concerning the self-employed. In short, this was Thatcherite "freedom of enterprise".

However, this eventually backfired when the self-employed found the taxman on their backs and realised what a con this was, specially for those on low wages. But self-employment did flourish in a few specific areas. The building trade was one of them. It had seldom provided permanent employment for its workers, even the very large companies like Bovis. But there did exist agreements made over the years with employers' federations which set a minimum standard for workers' conditions in the industry. With the building slump at the end of the 80s, companies felt strong enough to impose on their employees that they should agree to work as self-employed individuals, outside any national agreements and therefore on much lower rates. As a result, today, many of the old national agreements have been eroded or have disappeared completely.

Self-employment, however, is not restricted to industries which have traditionally had a lot of casual workers. Even large high- tech companies are resorting to self-employment. At GKN Westland, for instance, which among other things produces helicopters and other defence equipment, a significant number of highly-skilled technicians work as self-employed without any long- term guarantee for their jobs. And if they still enjoy relatively decent levels of pay, it is only due to the company's difficulty in finding the right skills.

Another popular scam to allow companies to introduce "painless" pay cuts has been profit-related pay (PRP). The Tories introduced this scheme to allow part of the wage to be linked to company profits. It provided a tax incentive for companies which was aimed at encouraging them to use PRP as a means to break from the usual pattern of pay bargaining. In addition, of course, it allowed them to effectively reduce wages since the PRP part of the pay (£4,000 or 20% of a wage packet) was tax-free for the employee. So companies could, and did in most cases, reduce this part of their employees' pay by the amount of tax they would have paid previously, without this being reflected in the take-home figure, which is what really counts for workers.

Besides, the way these schemes were explained to workers was primarily designed to get them to sign up to them rather than understand them. The result has been utter confusion and uncertainty and the dilution of the basic guaranteed wage.

For instance, Red Star, the privatised British Rail parcels division, introduced PRP in January this year, saying quite openly that they were aiming at making savings on their wage bill, given the financial difficulties of the company. Then in September workers received a letter from the company explaining that the PRP scheme was suspended and they were going to have their wages cut for the next four months because the company had not met the profit targets set by the auditors when they entered the scheme. Never mind the fact that Red Star workers were already among the lowest paid on the railways, with a basic take-home pay of £690 a month on PRP!

Not surprisingly, this "tax-effective" method of cutting the wage bill has been very popular - 10,000 mostly medium-size companies employing 2.6m workers were already involved by the end of 1996. So that the last Tory government decided to wind up the scheme by the year 2000, judging that it was costing too much in lost taxes. Now companies will be preparing for this deadline and workers may find that suddenly the PRP part of their pay seems to be going inexplicably down - in advance of another attempted pay cut no doubt.

Nothing quiet on the wage war front

Today large employers can no longer rely on some of the gimmicks used in the past to reduce their wage bills. Part-time work is likely to become less "cost-effective" due to European regulations. Self-employment is difficult to "sell" to workers outside certain fields. Subcontracting remains an option, but there are limits to what can be subcontracted - and to the reliability of cow-boy subcontractors. As to tax-based schemes such as PRP, they are being wound up.

So, now, some companies are beginning to introduce pay deals which actually cut the level of wages for the future. Among the large companies doing this, the recent dispute at British Airways provides the most graphic example.

The background to this was the announcement in 1996 that BA wanted to "save" £1bn by the year 2000 - that is increase its annual profits by this amount. They announced 5,000 job cuts initially while pledging to restore, eventually, 2,000 of these jobs.

These plans led to a number of disputes this year. Ground catering crews were confronted with a decision to sell off their jobs to a contractor in breach of an agreement signed three years ago. Luggage and cargo workers ended up with a 2-year pay freeze in exchange for "job security". But to crown it all, 9,000 cabin crews were presented with a pay deal which included a 19% cut in the starting rate of all new entrants, with longer hours and overtime included in basic rates for all workers. BA's plan, cynically put in those terms to the cabin crews, was to achieve £42m "savings" per year at their expense.

After a successful three-day strike at the beginning of July, a series of negotiations were embarked upon resulting in a deal agreed by the Transport union in September. In fact this deal simply endorsed, with only minor changes, the company's cost- cutting plan which workers had opposed by taking strike action! No wonder BA stated that the dispute had been "worthwhile" despite the short-term cost of the strike - estimated at £125m in lost revenue.

Other smaller companies have been trying similar stunts. Earlier this year Great North Eastern Railway (the old East Coast main line) came up with a pay offer for on-train crews which, among other things, also proposed cutting the starting rate of new entrants by £1,000 - while actually already employing agency workers on the rates they were proposing for new entrants. So far this "offer" has been rejected twice by the workforce and it remains to be seen what the company will try next.

In the bus industry, this year's T&G Busworkers survey notes a number of similar changes introduced across the country. At the Liverpool operation of MTL (6th largest bus company in the country), all newly-recruited drivers are to be paid 18% less than the existing rate. Likewise Clydeside buses, part of the Cowie Group (3rd largest bus company) has introduced lower rates for new drivers, but in addition they will have neither sick pay nor holiday pay. At another subsidiary of Cowie, Crosville Wales, new starters get a slightly higher rate, but they loose seniority increments, sick pay and get £200 pay for their annual 2-week holiday. A number of companies, in particular several belonging to Stagecoach (2nd largest in the country) have introduced lower "new starters" rates which are to be paid to new recruits for between one and four years depending on the deal.

Employers are trying to introduce a similar scheme, packaged in a different way, for electricians in the construction industry. In the pay talks which are currently underway over a three-year deal, the Joint Industry Board for Electrical Contractors wants to introduce a new "Skilled Mechanical Assembler" grade to do electricians' work. The rate of pay would be 25% less than the present rate for the job, with a shorter training period. The recruits on this new grade would be asked to do various jobs which the bosses claim are taking up the time of the electricians, leaving the latter free to do more complex work! It is not hard to guess why - soon, if the JIB has its way, electricians will find they have been replaced by lower-paid new entrants!

Whether they be the introduction of a two-tier wage system for the same job or the creation of "cheaper" grades on the basis of "crash-course" training of new workers, there is a common feature to all these wage-cutting devices: they amount to across-the-board pay cuts for whole sections of permanent full-time workers and they are written as such into regular pay deals negotiated with the unions. And this, compared to the old wage-cutting schemes seen over the previous decades, is relatively new.

The union bureaucracy's response yesterday...

In the past, union leaders have agreed to all sorts of wage-cutting tricks by the bosses under the pretext of "helping out" companies "in distress".

Ford again provides a good example of this. Here the union officials are well entrenched with a de facto "closed shop" and an extensive national bargaining machinery. This was never a company "in distress", yet subcontracting and the taking on of part-timers, for instance, were negotiated behind closed doors, outside the regular pay deals. When workers found out about these deals afterwards, usually when they were implemented on the shop floor, they were told by the officials that there had been no option, often with the excuse that without these backdoor deals Ford would pack up and go elsewhere.

Many workers recall the first time contract labour appeared in the Dagenham Assembly Plant - in the shape of a small number of fork lift truck drivers that the company wanted to hire on a temporary basis. This had never happened before, and a mass meeting was called to put this to the workforce. The then plant convenor begged the workers to allow him to say "yes" to the company on this, promising it would be just this once, and never again. The unions, he assured them, were utterly opposed to contract workers in the plant. This was 10 years ago.

Today there are probably a thousand contract workers just on the Ford Dagenham estate - around 10% of the total hourly workforce. Yet no mass meeting in the plants was ever again given a say on this. Worse, these contract workers are excluded from any joint representation on the permanent union structures in Ford plants. They are treated like second-class workers, not just by the company but also by the union machineries, even at times excluded from the canteens. But, in exchange for the unions' supportive attitude, Ford strongly recommends to contractors to get their workers to join the Ford unions - at least their dues will go into the bureaucrats' kitty!

Trade union leaders may well complain today over the endless variety of precarious and/or low-paid status. Yet over the past period they have played a role in helping the bosses to bring in these forms of wage-cutting employment. And wherever workers did try to put up some resistance against the bosses' attempts in this respect - in the post office for instance, against the use of casual labour - they found the union leaders sitting on the side of the bosses against them.

... And today

So, what is the attitude of the union bureaucracy with respect to today's renewed attacks against wages?

This year's TUC conference provided an explicit answer to this question, in its determination not to address any of the urgent problems confronting the working class.

Of course, it was to be expected that the conference would be a celebratory mass for the new Labour government, including, for the first time in TUC history, an address by the Archbishop of Canterbury. Fitting, perhaps, when all that the TUC leader John Monks could offer was moral exhortations to the bosses to be a bit nicer to the unions since they had adopted the "new unionism" partnership, and hope that the legacy of Princess Diana would bring "the flowering of a new compassion..."

Predictably too, Blair's sermon made it absolutely clear that he would not budge from his commitment to a "flexible labour market" and that there was no longer any need for "industrial warfare, strikes without ballots, flying pickets, secondary action and all the rest of it."

When they came to discuss real issues like labour flexibility, union leaders started by accepting part-time and temporary jobs as a fact, while insisting on "proper" rights for these workers. But how temporary workers assert "proper rights" when they do not have the right to a proper job was not explained.

Nor did union leaders explain how the TUC's demand that the present "protection" against unfair dismissal should apply from the first day of employment instead of after two years, would protect workers against "hire and fire" employers. After all, even if they win a tribunal case, the best they can get is a miserly compensation, since the bosses cannot be legally compelled to give them their jobs back. But for a number of years unions have been focusing their recruitment campaigns on the ability of their legal departments to win compensation at industrial tribunals - maybe the bureaucrats are only thinking about having a good argument to sell their cards to all these unorganised workers?

Even on the issue of union recognition, and Blair's obvious reluctance to fulfill his election promise on this without the CBI's support, there was no question of taking any action to push things. Nor was there any question of confronting Blair on his refusal to change anything to the Tory anti-strike - in fact the motion moved by the NUM fell without being debated when Scargill, who was meant to move it, was called just as he "happened" to be out of the hall.

No wonder the last day of the conference was spent more or less on a "debate" over the setting up of a TUC company called "Union Energy", which will buy electricity in bulk from the deregulated utilities and sell it to union members at a discount. Yes, the union leaders showed they completely discount "union power" ...!

In any case, certainly nothing in this conference indicated that the TUC leaders had the slightest intention to oppose the bosses' drive against wages. In fact they even made sure that the issue of the minimum wage would not be discussed, despite a motion moved by UNISON, the country's largest union!

On the other hand, it was during the conference that came the news of the deal agreed by the T&G at British Airways. And it was hailed as a major breakthrough - no doubt as a model example of the "new partnership" between the unions and the bosses promoted by John Monks throughout the conference.

Yet if this deal is a model of something, it is primarily one of a sell-out. Following the cabin crews strike in July, the T&G leader Bill Morris stepped into the dispute to propose his own plan aimed at... achieving the £42m/yr savings demanded by the company. Writing in the August issue of his union's journal, Morris explained his approach in the following terms: "In the spirit of our commitment to work to ensure the competitive success of companies where T&G members are employed, we will be bringing forward our own proposals to help British Airways find the cost savings it needs."

Such was the basis on which this deal was eventually reached, with a plan to achieve £26m saving through cutting the pay of new entrants by £1,000/yr and £16m through longer hours of work and shorter rest periods for all crews. In other words Bill Morris had stepped in not to defend the strikers' demands, but, openly, to help British Airways increase its profits!

The key point, according to T&G officials, was that now new negotiations were to be opened on the pay restructuring which BA had previously threatened to impose. And, as George Ryde, the T&G's national official for aviation said: "We can now have a debate about restructuring without the requirement to talk about savings at the same time." So the T&G has "won" the right to negotiate and keep its cosy relation with BA's management into the bargain. What good this will be for cabin crews when BA starts replacing them with cheaper new starts, is another matter!

What made the union's servility to BA's greed even worse was the fact that, despite being confronted by a strictly "legal" dispute in July, where crews had voted 2 to 1 to strike, British Airways had pulled out all the stops to intimidate and harass the workforce to get them to back off industrial action, recruiting scabs in advance, and taking all sorts of disciplinary action against the strikers afterwards. But it obviously takes a lot more than this to dampen Morris' determination to act as a business consultant for the bosses and his "commitment to work to ensure the competitive success" of BA... on the backs of his own members.

In any case, the British Airways saga does show something - that the union leaders' sweet talk about "new partnership" was not just a propaganda device aimed at helping Blair to woo the capitalists. The union bureaucrats mean real and big business. With the British Airways deal as their flagship and so-called "left" union leaders like Bill Morris in the lead, they are saying to the bosses: "You want competitiveness, bigger profits, a more flexible workforce? Here we are, the "new partnership" unions, and we'll help you in a big way provided you give us a chance and the recognition we need".

There is a dangerous game being played out before workers' eyes today. Just as in the past when the industrial muscle of those at work was never used to challenge the right of companies to increase profits rather than create real jobs, now the union bureaucrats are actually lending a hand to open wholesale attacks on wages.

It has long been accepted, rightly, by workers that anyone doing the same job should be on the same rate of pay - as a matter of principle and as a requirement to keep working class ranks united. The ability of the bosses to play permanent workers against subcontractors, the unemployed against those in employment, etc.., thanks to the help of the union bureaucrats, is something that workers have paid for and are still paying for dearly in this country. Now union leaders are separating the interests of "new" workers and "old" workers, thereby helping the bosses to create more divisions among workers.

It is therefore even more vital that there is resistance to these attacks today - and resistance which unites all sections, young and old, employed and unemployed, permanent and short-term, part-time and full-time, in a counter-offensive to confront the bosses' drive against wages, and their consultants in the union bureaucracy.