Tuesday 28 August 2018

Working For Families: Keeping The Wheels Of Capitalism Turning.

The Way We Were: If what used to be called the social wage (education, health, welfare payments such as Working For Families) had to be picked up by the bosses, then our society would very rapidly degenerate into something resembling early industrial Britain. The capitalists couldn’t pay their workers enough to cover the now non-existent social wage, so they wouldn’t. Human-beings would, wherever possible, be replaced by machines, and those without a stake in the new order of things would be left to starve in squalor.

SUSAN ST JOHN’S INDIGNATION at the way the Working For Families (WFF) payment has been cast as an employer subsidy is palpable. “Blaming WFF for low wages”, exclaims Susan “is a bit like pointing to our high rate of suicide and blaming it on the existence of the mental health services.” Neither is she slow to sheet home the “true cause of low wages”. This, she says, is to be found in “casualised hours, precarious employment, automation, globalised labour markets and falling wage share of output due to loss of union power.”

St John is scathing in her condemnation of the purveyors of what she regards as the “subsidy myth”. Matthew Hooton, Eric Crampton on the Right; Bryce Edwards on the Left; and “others”.

Well, among those “others” I must acknowledge myself. Until relatively recently, I, too, was convinced that WFF, by topping-up the manifestly inadequate wages paid to workers, acted as a multi-billion-dollar subsidy to the employing class. Instead of the bosses paying their workers a living wage, those workers were being kept afloat by the taxes paid by other workers. How could that be fair?

But then I found myself seated next to Susan at one of Laila HarrĂ©’s “salons” and was set straight on WFF in the most forthright fashion.

Where were the critics of WFF prepared to call a halt? Susan demanded. If this particular “subsidy” was torn away, why not the taxpayer-funded public education system? Or public health? Just imagine how much more the bosses would be required to pay their workers if their wages were to cover not only the additional costs associated with raising children, but also the cost of private education and private health insurance? And what about the roads and the electricity grid? What about the water supply? Or sewerage disposal? How high would wages have to be lifted if every man and woman in the country was required to pay for all this crucial infrastructure directly – rather than by means of taxation?

The fact of the matter, Susan informed me, is that the entire capitalist system is subsidised. The viability of the present economic system; the ability of every company – private or public – to return a profit to its shareholders; rests upon the willingness of the state to pick up the lion’s share of the costs of raising, educating and keeping healthy all those workers whose daily labours keep their employers in business.

It was not always so. In the very early years of capitalism workers were paid just enough to cover the cost of keeping a roof over their heads and food in their bellies – less if demand faltered or prices increased sharply. The contribution of the state was limited to providing the soldiers necessary to restore order if the capitalists’ workers, driven to utter desperation, rebelled; the courts in which the ringleaders could be convicted; and the prisons (or penal colonies) in which such miscreants could be safely immured.

It didn’t work. As industrial technology grew ever more sophisticated, the need for a well-educated workforce grew ever more urgent. Likewise, with workers’ health. Deadly diseases left gaping holes in the working population. Clean water, hygienic waste disposal, unadulterated food, safe housing: all of these improvements, supplied collectively via rates and taxes, were crucial to improving the quality of life of the working-class. They were no less important, however, in keeping the capitalists profitable. Assessed from the perspective of the long-suffering wage and salary earner, the whole edifice of industrial civilisation looks suspiciously like an employer subsidy!

Which is precisely Susan St John’s point. If what used to be called the social wage (education, health, basic infrastructure) had to be picked up by the bosses, then our society would very rapidly degenerate into something resembling early industrial Britain. The capitalists couldn’t pay their workers enough to cover the now non-existent social wage, so they wouldn’t. Human-beings would, wherever possible, be replaced by machines, and those without a stake in the new order of things would be left to starve in squalor.

And, yes, you’re right, what this all adds up to is the far-from-novel conclusion that capitalism is an economic system subsidised by the many to the inordinate advantage of the few. Working For Families is, therefore, a very long way from being the most egregious example of society picking up the tab for meeting at least some of the needs of its most vulnerable members. Suggesting that the bosses take over this responsibility is pointless: they have neither the means, nor the inclination, to do so.

And, no, you’re not wrong, capitalism is, indeed, a grossly exploitative and unjust system which only goes on working because the people who keep the wheels turning get up every morning and, well ….. keep the wheels turning.

One hundred years ago, working people understood this. Hell, they even sang about it:

They have taken untold millions that they never toiled to earn,
But without our brain and muscle not a single wheel could turn.
We can break their haughty power, gain our freedom, when we learn
That the union makes us strong.

Solidarity forever!
Solidarity forever!
Solidarity forever!
For the union makes us strong.

This essay was originally posted on The Daily Blog of Tuesday, 28 August 2018.


Guerilla Surgeon said...

From the 1940s, American firms paid for their workers' healthcare. That didn't work out particularly well – except for those people in decent unionised jobs. And it's been peeled away by successive Conservative governments. To the point where people without insurance go to a hospital when they get sick, get stabilised and told to bugger off. No follow-up care, nothing for chronic illnesses. And this is where the myth of no one goes without healthcare in the US is made.
And of course American conservatives hate government subsidised health care to the point where they labeled it "Obamacare" and condemn it outright. And the "sheeple" (I think that's the 1st time ever the use that word) are screaming "we must get rid of this socialist Obamacare – but don't you dare touch my Affordable Care Act." As always, conservatives take advantage of low information voters.
But, without the subsidies, what you are describing here Chris is Libertarianism. Or at least one of it's manifestations – because many of them can't even seem to agree on whether they are obliged to feed their kids or not – but I guess that's the fate of fringe parties everywhere, the fringe left was much the same when I took an interest in it.
The only government institutions they are interested in, courts, police, Armed Forces are those that protect their property. Everything else can go hang.
Libertarianism doesn't work, it can't work, it has never worked anywhere, and yet...... sigh.

Jens Meder said...

But without "the wheels to turn" the workers would have to find work somewhere else, or starve, or resort to robbery from those that have saved some capital.
And when all the capital is consumed and everyone is afraid to build up wealth because of robbery by those who see wealth accumulation as anti-social, unfair and selfish greed, society ends up at a "hand-to-mouth" poverty level- or a dictatorship which enforces capitalism.

The question arises - what is more democratic - enforced government monopoly capitalism, or mixed capitalism, with direct personal participation in the efforts, responsibilities and benefits of capital creation and ownership by 100% of citizens beside the government?

Nick J said...

The money to pay for Working for Families has to come from somewhere, either government debt or taxes. If it's debt it gets paid for by more debt or taxes or both. Which taxes and paid for by whom?

I'd suggest that WFF is a subsidy for employers because it means that they can indeed undercut labour rates. What Susan says is right and wrong, the WFF package came after the dire affects of automation, casualisation, de-Unionisation etc, it is a response to those already depressed wage levels. It's presence I'd suggest makes it easier for employers to hold down wages. As such it distorts price discovery in terms of supply and demand.

In terms of paying for the social wage capital has avoided it for years by fleeing markets / nations for lower costs. The current free trade ethos is enabled by the lack of international tax and tariff agreements to prevent multinationals and the wealthy seeking low tax regimes. Using this threat the old "progressive" tax models got "reformed". Top rates in the 60s in most countries were 90+%. That is what enabled us to have a welfare state.

Is it possible again? Yes, but it requires an aggressive cogent international Left,not a Left interested in identity and grievance. It's about not destroying capitalism but making sure it plays to the benefit of all. That requires strict regulations and definition.

Nick J said...

Jans, enforced government monopoly capitalism sounds to me like communist command economics with associated authoritarianism, or fascist corporate crony economics with associated authoritarianism, or today's corporate oligarchs with velvet gloved authoritarianism.

My take is that the best option is a mixed model with democratic control over natural monopolies such as public utilities, transport etc, and very strong anti competitive practice laws to encourage markets toward price discovery based upon supply and demand.

I'd also introduce tax laws that give no favours to any individual or company, and a progressive tax regime that recognises that in any market or society wealth aggregates at the top. The benefit of being wealthy is that you enjoy a better life, but you don't do it at the cost of others misery.

Kat said...

Social capitalism is what the New Zealand system is really all about. Finding the right balance has been the challenge. A new era has dawned and we are on the cusp of tackling the issues that inhibit fair play. Credit must be given to the PM for continually shining a light into the dark places in the most passionate, conciliatory and highly polished style not seen in generations.

Steve Alfreds said...

While I understand Susan St. John's reasoning I'll bet she has never had to declare her income online every week to MSD? I would personally prefer to be paid a better income and not have to deal with MSD's bureaucratic BS. I think the current government knows the projected costs of WFF will continue to grow unless employers are forced to pay workers more and that is one of the reasons for its campaign to increase the minimum wage to $20 an hour by 2021. If they don't the government will have to pick up more and more of the tab while the country's employers take the profits. I don't think subsidising Bill and John's low wage nirvana was what Clark and Cullen had in mind when they introduced Working for Families.

John Hurley said...

Jacinda Adern to Katherine Ryan
"but at the same time, continuing on with an economy built on selling houses to each other and migration. It might have given up growth rates of about 3% but it was not a sustainable economic plan and it wasn't delivering for New Zealanders, so I'm willing to progress this modernisation of our economy and ..."

So after all this time our immigration policy has been a failure?
What about all those people who were scorned (Greg Clydesdale and beyond)?

In a subsequent interview with Paul Spoonley (Nine to Noon) this wasn't even mentioned. Now I notice RNZ (Morning Report) has it's knives out? Or is it just me?

greywarbler said...

John Hurley
It's likely to be just you. I think you are taking notice of the wrong things and likely to remain confused and bewildered!

I suggest don't concentrate on picking holes in Jacinda's vehicle to take us through the next few years. That's the sort of thing that keas do, but we put up with them because they are special to NZ. Jacinda is a new bird, with a new approach that is special. It seems so long since we have had ideas that try to advance us towards a future that looks possibly positive, unlike the fantasy pictures produced pre-Jacinda.

And I have noticed that there is an attempt by some in RadioNZ to try to get grips on our present, and see what viable things are in the wind for our future. Before we all get blown over, knocked down, flooded out or damaged in irretrievable ways just when we need to be strong and wise.

Jens Meder said...

Nick J is right in explaining government monopoly capitalism, and thus also helping to spread the tangible - not theoretical or ideological - truth, that without saving and profitable use or investment of those savings, "surpluses", or capital - only a pre-stone age hand-to-mouth "Garden of Eden Paradise" way of life can be achieved, without the "paradise" factor now, because of our larger population in relation to land than before the Stone Age.

But Nick J did not come up with any opinions on the pros and cons of systematic individual participation by 100% of citizens in capital creation and ownership, which could be expressed as "The Third Way", "People's Capitalism" or the "Ownership" Society or Democracy.

Kat - would not the concept of "Social Capitalism" harmonize very well with 100% of New Zealanders' personal participation in it - by an initial grain of (retirement) capital donated from birth, together with all the other obligations for which responsible people commit themselves at child birth ?

Kiwiwit said...

So where exactly does the money come from to pay for WFF and every other government programme? Yes, it comes from taxes - and who pays those? Workers and consumers and businesses. And where does the money they pay their taxes come from? And don't give me Marx's labour theory of value - if that were true we would never get any better off.

peteswriteplace said...

Solidarity forever until they emasculated the unions, something I was a victim of back in 1991. Again, the future is interesting.

Geoff Fischer said...

On the little evidence I have seen it does seem that the WFF payments do help to maintain high rents and support housing prices.
Certain landlords could and would halve their rent demands if WFF payments were not available.
Under the same circumstances workers would be driven to demand higher wages, and some employers would be able to meet their demands.
So the overall effect must be that some employers are paying their workers less than they could, and some landlords are charging higher rents than they could in the absence of WFF.
We could argue that WFF is a subsidy to capital but we could also argue that it is a benefit to workers.
We could argue that it distorts the labour market but we could also argue that it helps to keep the labour force stable and productive.
Those critics on the right are probably asking whether, as a form of redistribution of income, it can be considered "fair".
I start from the presumption that it is fair to redistribute income to where it is most needed, but still wonder whether the WFF system will be sustainable in the longer term.
Apart from the fact that it is more targeted, is WFF different in principle from the old style tax deductions for married couples with children and Family Benefit?
I reckon I would need to see more expert analysis before we would be in a position to answer those questions. Has this work been done?

Nick J said...

Jens, a society where everyone has a share is no longer capitalist. That would require an even distribution of money, that is very communistic of you.

The problem with capitalism is the same as that with communism, it revolves around humans being creatures with desire to be better than their neighbour, to get ahead, to be dominant, to pass it on to their offspring. That cripples both systems. In capitalism it results in aggregation of power and money, in communism aggregation of power to the party hierarchy, and no incentive or ability to get ahead otherwise.

My suggestion is always the best of both, private sector to create incentive and government to redistribute and regulate. There will always be people at top and bottom, the issue is to allow both a good life.

Jens Meder said...

Nick J - 100% participation in capital creation and (retirement) investments ownership will not require nor lead to an even distribution of money, because at proportionally equal savings rates, higher income earners will still remain more wealthy and have more money than lower income earners.

But it will reduce the proportion of"have nots" and eventually eliminate poverty altogether more sustainably and effectively, than what can be achieved be by the mere redistribution of income alone, which becomes unsustainable and self-destructive from the moment of profits becoming inadequate to finance all the poverty alleviating welfare demands, and governments have to start borrowing for it.

Unknown said...

She is missing a very fundamental and obvious fact that completely voids her argument. The 'state' doesnt pay for anything because the state doesn't generate income, it simply decides WHAT taxpayer money is spent on (even govt debt is paid by taxpayers). There is a massive difference between these things ...and I'm surprised that Chris accepted her argument so uncritically.

Geoff Fischer said...

I am not convinced that either Susan or Chris at this point have it right about Working for Families.
It is probably not very helpful to argue over whether WFF is intended to help labour or capital, or whether the actual benefits of WFF accrues to labour or capital.
It would be more helpful to consider the immediate and long term effects on capital, labour, and the workings of the economy as a whole and how they might differ from the effects of other state interventions such as state funded education and health systems.
Such "normal" state education and health systems and unemployment benefits are about providing a fit and sufficient labour force indiscriminately for the benefit of all industries (and all workers, whether or not they are employed).
But WFF is granted exclusively to those who are employed for gain, and this is a salient point of difference with most other state benefits and provisions.
Is WFF intended to cover the additional costs to the worker of being employed? These may be significant, including costs of child care, transport (either owning and operating a motor vehicle or paying public transport fares), clothing requirements and so on. But WFF seems to provide more than would be required to meet those expenses.
Is WFF intended to demonstrate moral approbation of employment, and conversely disapproval of unemployment? The authors of the system would deny that, and although there may be some truth to the suggestion, we should take them at their word and accept the disclaimer.
The critics on the right would be saying that WFF is funded by taxing profitable, efficient employers and workers whose skills are in demand, and paid to workers who are employed in inefficient unprofitable industries and/or those whose skills are not in demand.
In other words it is a subsidy to inefficient enterprises and a disincentive to workers to improve their situation by either demanding higher wages, working harder, or becoming more highly skilled. As a result wff would act as a brake on the economic efficiency of capital as a whole.
As I have noted previously, landlords and lenders of capital for housing are two social groups which particularly draw benefit from WFF, and this seems anomalous. It also means that the cost of housing is being pumped up to exorbitant levels by WFF.
That is not to say that I would urge the abolition of WFF unless something more sensible could be put in its place. That "something more sensible" could be fully state-funded housing and public transport.
In answer to Simon Walker, once the state has obtained money from the taxpayer (or territorial local authorities from the ratepayer) that money is government money. It is no longer the taxpayer's or ratepayer's money. The taxpayer has no direct control over how it is spent, and bears no responsibility for how it is spent. Similarly the money I give to a merchant in exchange for goods ceases to be mine,and becomes the merchant's, the moment I hand it over.
In the case of the state taxation or local government rates I may be an unwilling payer, but I am legally obliged to pay, and it seems vain to insist that it is still "my money" when legally and practically it has moved completely outside of my control. You might consider that government money is still "morally" the property of the taxpayer, but in practice and in law it is not.