Indeed, the falling real incomes for households on middle to low income, which amounts to over a third of the nation’s population, is more than just a passing storm, or a shift from one economic paradigm to another, but in the words of Former US Treasury Secretary Larry Summers, “a long-term, “secular” stagnation of the developed capitalist economies.”
The slowing growth of British wages had started well before the financial crisis of 2008. A recent think tank report, titled “Growth without Gains,” revealed that the general population’s living standards had deteriorated long before the onset of the previous recession. The report showed that despite Gross Domestic Product (GDP) growth of 11 percent between 2003 and 2008. Median wages were stagnant and per capita disposable income fell at the household level in every region outside London. Moreover, there has been a rapid shift in the way income has been distributed from wages to profits. Just 12p of every £1 created by the UK economy finds its way to the wages of workers in the bottom half of the earnings distribution, a drop of one quarter over the past 30 years, according to the report.
While, this helps explain income inequality there are other fundamental reasons at play which could explain the slow growth of pay of workers in the low-middle income bracket. They are as follows; Globalization. While there are many upsides to globalization and free trade, such as competitively priced goods and fewer wars as nations seek to trade rather than wage wars on each other, there have also been some downsides. Without doubt, free trade has undermined the real wages of blue collar workers, countless examples can be cited of workshops being setup in low wage regions, thereby displacing factory, process workers in the UK, or forcing them to accept lower wages. Furthermore, there is growing evidence of white collar incomes being adversely affected by increasing competition from a new generation of young educated workers in developing nations. For example, Deutsche Bank cost-cutting in New York and London has been brutal in recent years. But the bank has increased its employee head count in India to 6,000 and has recently employed 125 analysts in Mumbai.
Capital’s obsession with returning greater shareholder value at the expense of rewards from ordinary workers has also contributed to lower pay rises for medium to low income workers.
Despite the fact that Technology has raised productivity in every sector it has also replaced the tasks undertaken by many other low skilled workers. Certainly, we are living in times when the digital technological revolution is evolving beyond that of the last decade. The fusion of nanotechnology, information technology and mechanics is propelling robotics to new heights. Drones are becoming more sophisticated, resulting in pilotless aircraft, which are currently being deployed by the military for surveillance and aerial combat missions. So drones can now do the job of piloted military jet at a fraction of the cost, which logically means less demand for pilots. On the civilian front, Amazon is currently requesting permission from the authorities to use drones for parcel deliveries and robots will soon probably replace people in their dispatch warehouses. Put simply, robots do the work more efficiently than humans, they are cheaper, they work 24/7 and they don’t require a pay rise. Then there is the autonomous vehicle, driverless vehicle, which is now a technical reality, apparently this will mean no more human error road accidents, which could cut the road mortality rate and insurance premiums. But it also means putting the professional driver out of business. Technology is revolutionizing education; predictions are that within next few decades half the universities won’t exist. Workers will require education and skills more than ever in the brave new world, but they will acquire it online, at a fraction of the cost. This could mean less work, or lower paid work for education workers.
So labor’s bargaining power will continue to erode, as the true supply of labor exceeds its demand, thereby keeping wages low.
Perhaps we are moving towards what Jeremy Rifkin describes in his book, “The zero marginal cost society,” like Marx, Rifkin thinks capitalism will consume itself. The argument runs something like this: increasingly intelligent machines will generate products at nearly zero marginal cost—in other words; the cost of producing each additional unit falls to essentially nothing. And when that happens, everything becomes free, profits disappear and… capitalism eats itself.
What this could imply is dwindling income for governments, as their tax revenue continues to shrink. Less public finance means eroding public services in health, education and defense. So a gentle slow march into poverty for millions.
But people are resourceful and when they start realizing that the market economy is declining, along with the public sector there is likely to be a growth in the third sector, voluntary and community based jobs and self-employment. The downside is that this type of employment often pays less.
With regards to trading, the world’s most sophisticated form of gambling, as a means of escaping the sinking ship; it could be for those who have a strong constitution, a healthy sense of cynicism, able to manage risk, numerate, literate analytical and cunning. But you need to keep in mind that trading is a zero sum game with more losers than winners and the house always wins. Mrs. Jones might be best suited to baking cakes for the local raffle. However, a trader’s academy for people who believe they already have the material to work with might be a winner.
