Financialisation: Consequences for Working People

Having set out a portrait of financialisation as a key characteristic of contemporary capitalism, along with the decline of manufacturing, deunionisation, weakening of employment protection and offshoring and outsourcing, we turn to some of the consequences for working people, especially in relation to jobs, conditions of employment and pay. Prior to 1976 levels of unemployment of about 2.5 % were the norm, but they began to rise to over 5 % by 1979 when Thatcher came to power. From then unemployment began to rise steeply, rising from just over 5 to 12 % by 1982, with over three million workers out of work. Although unemployment in the mid-1980s fell again, since then to the present it has only barely—and rarely—fallen to 5 %, at least double the ‘old norm’. Many of those employed are in insecure employment: in a report by the International Labour Organization it was reported that on a worldwide basis only one in four jobs could be considered secure (Allen 2015,

The Guardian). Since the crisis (of 2007—2008) there has been a ‘vicious cycle of weak global demand’ (Allen 2015, The Guardian) with demand hindered by insecure employment. In the UK ‘almost 700,000 people have zero-hours contracts as their main job’ (Inman 2015, The Guardian; see also Brinkley 2013, Work Foundation).

As manufacturing jobs disappear, replacement jobs are often lower skilled and, with weaker employment protection, less secure. Holmes has argued that employment protection and union density are ‘positively related to the growth of high skilled jobs’. This is true across several European countries but marked in the UK with its ‘weak employment protection and low minimum wage’ (Holmes 2014: 6). As skilled jobs disappear in the UK, the replacement jobs are more likely to be unskilled than in other countries such as Germany and France (Holmes 2014; O’Connor 2015, Financial Times). There is also evidence that in the so- called liberal economies in Europe (UK, Ireland) a higher proportion of jobs are classed as insecure (UK 24 %, Ireland 24.6 %) compared to the ‘social democratic’ economies such as Denmark and Norway (13 %) or others such as Germany (13.4 %) (Holman and McLelland 2011).

At the same time as manufacturing jobs are lost and offshored and employment becomes less secure, wages are driven down in economies— like the UK—with lower union density. The Trades Union Council (TUC) published a report summarising the trend over the last four decades. They drew the following conclusions:

Data from the Office for National Statistics show that between 1977 and 2008 the wage share fell from 59 per cent of national income to 53 per cent, while the share of profits in national income rose from 25 per cent to 29 per cent. At the same time, average (median) earnings failed to keep pace with growth in national income (as measured by gross domestic product (GDP). (Reed and Himmelweit 2012)

The wage share of GDP fell steadily for over 35 years, profit shares rose (as a percentage of GDP) and inequality reached new heights as the top 10, 5 and 1 % in wealth and income drew away from the rest of the population into another world (Irvin 2008). This might have been expected to suffer a shock in the recession of 2008. In fact, post-recession pay for executives jumped ‘by 14 % while average wages increased by 0.7 %’ (Dunt 2013). The difference is even greater since executives typically receive much more than their nominal income. Thus ‘the total package for FTSE directors shot up via a 58% surge in the value of long term incentive plans’ (Dunt 2013, citing Thomas Reuters Data Services). The TUC cite figures from the International Labour Organization (ILO) showing that the UK had the third largest fall in real wages of any developed country in the period 2008—2011. And this fall is also evident over a long period: ‘

The longer term story in the UK over the past three decades is of two related factors—a fall in the share of national output going into wages and an increasingly large share of that shrinking pool being taken by people at the top’ (Weldon, Touchstone, TUC 2012).

The fall in wages affects not only people working in industry, retail, services and hospitality—working-class jobs—but also managers. Middle managers are vulnerable to the ‘solution’—readily available to executives of large organisations who have been charged with reducing costs—of delayering, or stripping out middle layers of management. In 2014 it was reported that ‘a fall in real wages is being driven by a hollowing out of managerial jobs and shifts in the workforce that mean more workers are accepting poorly-paid jobs’ (Inman 2014, The Guardian). At the same time (February 2014), the more conservative Telegraph was reporting that ‘hundreds of senior Barclays investment bankers and managers face being made redundant along with thousands of ordinary workers as the lender looks to cut as many as 12,000 jobs’ (Wilson 2014, The Daily Telegraph).

The Telegraph report observes that Barclays plan to use information technology (IT) to ‘replace jobs and accelerate branch closures’. Not much later The Grocer reported that Asda had confirmed ‘1360 management redundancies in its stores’ (Hegarty, The Grocer 2014), and the Guardian reported that Lloyds was about to ‘axe half of its small business managers with 1000 job cuts’ (Treanor 2014, The Guardian). Whilst banks cut the jobs of business advisers, the small businesses to whom they lend—or do not lend—money are failing at a steady rate with ‘more than half of new small businesses in the UK failing to survive beyond five years’ (Edward 2014), and about 6000 small businesses fail per quarter; ‘after falling in 2010 the annual number of business failures has crept upward—we expect 24,900 small business failures in 2013’ (BDO Business Pulse Spring 2012)

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