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Rishi Sunak says freezing the pay of millions of public-sector workers is not austerity. This is doublespeak. If the chancellor goes ahead with the proposal as part of this week’s comprehensive spending review, he would be imposing a real-terms cut in the wages of 4 million public-sector workers, including teachers, police officers and civil servants. Were he to go ahead with his plan, Mr Sunak would be peddling the snake oil of trickle-down economics.
Cutting the pay of public-sector workers next year will reduce demand in the economy just when one would expect a government to be boosting it to escape from a Covid-induced recession. This is bad politics. Aware that he cannot pare back the pay of those the nation clapped for during the summer, Mr Sunak will exempt nurses, doctors and other NHS workers from “pay restraint”. But other key workers are also worthy of such largesse because, as the pandemic has revealed, without their efforts society would have ground to a halt.
The policy is grounded in expediency. Mr Sunak can argue that during the pandemic public-sector workers were secure in their jobs while their private-sector counterparts faced job cuts and reduced incomes. State employees, says the chancellor, ought to bear a heavier burden. Yet since 2010, public-sector pay has fallen behind the cost of living as the intentional result of government policy. Average earnings in government service in 2020 were 1.5% lower in real terms than a decade ago.
Mr Sunak is the latest Tory thinker to deploy metaphors to affect a wider understanding. He has suggested that his party has a “sacred duty” to “leave the public finances strong”. But the economy is a construct, not a deity. He is simply seeking to frame his case in terms meant to convince the average worker that they will eventually benefit from wage cuts and harsher working conditions. They will not.
The size of government is a political choice rather than an economic necessity. Fiscal and monetary policy should be purposed towards socially desirable outcomes. The economist Wynne Godley showed how government deficits rise and generate wealth. It is the inflation risk that must be managed. History has vindicated such work: Japan has run large deficits for decades while maintaining zero interest rates and low inflation. A nation’s productive capacity and resources are real constraints to government policies, not arbitrary levels of debt. The discredited idea that state borrowing drives up rates should be buried this year after the Bank of England spent £350bn on its interest maintenance strategy.
The coronavirus pandemic has widened inequalities. People living in the most deprived neighbourhoods are not only at higher risk of dying from Covid-19, but suffer more from unemployment and poor mental health. Public-sector employees make up a higher proportion of the workforce in the poorest parts of the UK, especially in those red-wall seats in Wales and north-east England that the Conservatives won last year. A pay freeze would undermine the government’s commitment to “levelling up” and widen gaps. A progressive agenda would tilt the wage distribution towards key workers and away from socially useless roles such as banking, a profession where Mr Sunak spent his formative years. That might explain why he touts such doublespeak.
Source: The Guardian
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