‘The clue is in the name’, Ed Miliband said, Labour is ‘the party of work’. The previous UK Labour party leader fought the 2015 general election on a manifesto that promised ‘to reward hard work’. Yet soon after the election one of the policies central to Labour’s platform, an increased minimum wage, was adopted by the winning Conservative party.
The Conservatives’ increased minimum wage, alongside an upward employment trend, provides political cover for reforms that substantially reduce Britain’s social welfare provision. The cover blew as over 2 million working families faced average annual income losses of £1,600, but the planned tax credit cuts were largely only delayed. Labour though is still yet to offer any coherent defence of social welfare or alternate policy proposal. This is in part because the idea behind shifting the policy agenda from welfare to work is theirs.
Aside from (further) raising the minimum wage, social policy debate on the left in the UK, and the US, has centred around re-laying the foundation of the post-war welfare state: full employment. But to expect work to secure social welfare is a conservative strategy. The policy of full employment was conceived for working men in the last century, not working families in this one.
Today, the major socio-economic divide is between those with regular, secure good jobs (and partners), and increasing numbers without. Almost all households in the UK have an adult in work (excluding the disabled or retired). But one in three jobs are poverty-wage paying, insecure and/or unsafe, and two in three children in poverty live in working households.
Universal Credit, the Conservative government’s major welfare reform programme, in part recognises that the main problem is not families in which no one works at all. Much of its effort is directed towards those considered to be not working enough. Universal Credit combines payments going to people in and out of work, and smoothes the rate at which they are withdrawn as working hours increase. Alongside it, sanctions now extend to those who in a given week, manage to secure fewer than 35 hours work. The reforms assume that a low-skilled employee freely chooses their hours – and that they make this choice solely on the basis of whether their pay minus tax credits leaves them with some change.
Neither assumption is realistic. Firstly, many workers cannot get the hours they need, and certainly not hours they can regularly schedule around family life. Growth in insecure and unpredictable work is a trend seen on both sides of the Atlantic – ‘contingent work’ accounts for all the recent employment growth in the US and in the UK, zero-hours contracts and underemployment have increased markedly. Despite the hopes placed in industrial policy, the chances of mass regular, full-time routine jobs coming back are slight.
Secondly, even when people are able to choose their working hours, their individual net income is not the only basis on which they do so. Women – consciously excluded from the post-war conception of full employment – are now vital to achieving it on most of its various definitions. Already though, almost all the family income increases since 1980 for low and middle-income families have come from women increasing the time they spend in paid work. And if we account for the unpaid work and caregiving that women contribute and it costs to replace, household living standards look even worse.
Children add to a family’s costs, and take away time and flexibility to work. This reality is what a work-centred approach ignores, but what UK tax credits since the early-2000s have addressed. Until recent reforms, the UK system was different from the US one in that it required fewer weekly working hours for parents, especially single-parents, and child-specific tax credits were far more generous, and could be fully claimed, even if parents had no earned income. The loss of such child-centred supports is one reason why it is estimated that the higher minimum wage will offset only 13 per cent of lost income for working-age households.
Recent welfare reforms move the UK closer to the US model, but it should be the other way around. The UK’s female employment rate lead over the US – which explains its overall employment rate lead – reflects more women working part-time. Despite low-skilled American mothers working more hours, with younger children and only food-stamps to fall back on, it was the UK that seriously reduced child poverty on all measures through the 2000s, while the US made little progress, and saw extreme poverty emerge.
Higher employment and minimum wages are necessary, but sorely insufficient. What marks out the rich countries with lower in-work (and child) poverty levels is not economic performance or labour bargaining power, but family demographics and simply how much is spent on social welfare. Tax credits were instituted – when experiments in providing a basic income were not – because they are a form of welfare consistent with the dominant ethics of work. Linked to earned income, tax credits helped sustain the industrial idea that to be a worker was to be independent. But they were a policy response to a post-industrial reality in which the idea that work makes you free, if only from poverty, is often untrue.
The expectation placed on employment is not only a practical policy problem. It also creates a political trap in which the left is unable to challenge the logic of labour markets, place any value on time or care giving, or acknowledge the needs of dependent children and different families; unable, that is, to make a case for social provision. It is a trap that allows the right to simply adopt a full employment target and increased minimum wage to legitimize a retrenchment of social security. In the UK, Labour, retreating to an old politics of work, finds itself with no good reply to the Conservatives who, pointing to record-high employment, now claim to be ‘the party of working people’. Labour’s current crisis is a deep one, and the clue to why is in the name.
Published on SPERI Comment, the Political Economy Blog