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Hectors House

Pay crunch coming as productivity struggles (CIPD budget response)

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Rising inflation and stagnant productivity is likely to lead to a tough squeeze on pay plus employers need to make sure their workers are upskilled, which highlights the folly of buying in skills via employing migrants

https://www.cipd.co.uk/about/media/press/080317-budget-response

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This idea that-in aggregate- higher productivity = higher wages is quite odd when you think about it. If the price of labour is a function of the supply of labour and that supply is effectively increased by making existing labour more productive then the outcome must be lower wages as the relative scarcity of labour declines- not higher wages.

Simply put- if I can double the output of my existing workers then-all other things being equal- I can sack half my workforce. So have my workers increased or decreased their wage bargaining power by doubling their productivity?

Would they not be better advised to halve their productivity and thus increase the need for their labour, making their bargaining position stronger?

The exact size of the pie might ultimately be less important than the ability to enforce your right to have a slice of it.

If in some future scenario the pie was vast and produced almost entirely by robots, that prodigious productivity would not save the workers whose bargaining power has been reduced to zero- they would have nothing and be destitute in a world of plenty.

 

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Indeed Wonderpup. Sack most of the workers then wonder why you can't sell your product. 

 

Henry Ford understood the conundrum.  Our leaders seem to have forgotten it for the last 20 years or so......

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It's an interesting point, we're currently undergoing a major productivity drive at work (large FTSE 100 FMCG company), and one of the upshots of the analysis is that about half of what we do is utterly pointless. Albeit no-one seems to have the balls to admit this. Too many entrenched viewpoints and vested interests, almost reminds me of my time in the public sector!

Whereas I'm guessing there's none of that in the far east etc. Employees know they're easily replaced, most of the workers I know in China/Singapore etc work 12-14 hour days as a matter of course, can't see it catching on in the UK!

 

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16 minutes ago, Craig_ said:

It's an interesting point, we're currently undergoing a major productivity drive at work (large FTSE 100 FMCG company), 

 

so the first thing you do when you get to work is get o n the internet forums...

I could probably double productivity in any office based firm in one day.

 

:lol::lol::lol:

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8 hours ago, wonderpup said:

This idea that-in aggregate- higher productivity = higher wages is quite odd when you think about it. If the price of labour is a function of the supply of labour and that supply is effectively increased by making existing labour more productive then the outcome must be lower wages as the relative scarcity of labour declines- not higher wages.

Simply put- if I can double the output of my existing workers then-all other things being equal- I can sack half my workforce. So have my workers increased or decreased their wage bargaining power by doubling their productivity?

Would they not be better advised to halve their productivity and thus increase the need for their labour, making their bargaining position stronger?

The exact size of the pie might ultimately be less important than the ability to enforce your right to have a slice of it.

If in some future scenario the pie was vast and produced almost entirely by robots, that prodigious productivity would not save the workers whose bargaining power has been reduced to zero- they would have nothing and be destitute in a world of plenty.

 

I have made the case before , the only meaningful solution is to legislate lower weekly hours , 4 day week the new norm ?

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19 minutes ago, moneyfornothing said:

I have made the case before , the only meaningful solution is to legislate lower weekly hours , 4 day week the new norm ?

That's what you could do with lower housing costs. Our Governbankment want the opposite, higher living costs to be be paid for by more people in a house, working more hours per week for more years and retirement a carrot on a continually extending stick. The bankers would lobby against a shorter working week.

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3 minutes ago, moneyfornothing said:

I have made the case before , the only meaningful solution is to legislate lower weekly hours , 4 day week the new norm ?

Natural outcome would be prices going down. If you keep all workers and double production you need to half price for workers to afford the increased production.  If you cut workers and keep production level then workers can't afford products and you need to cut price. If you don't cut price then the system will only balanced when you stop producing.

Unfortunately our masters don't like deflation and engineer never endless money supply backed by debt (now practically without any backing,  government bonds bought by QE endlessly rolled on central balance sheet - effectively zero coupon perpetual bonds)  . 

This way workers can borrow money directly or indirectly (tax credits finance by the government borrowing) and buy staff they can't afford. Rich get richer by maintaining their profit margin and accumulating freshly created money.  All happy, with a small problem of a growing debt mountain, which can be fixed with lowering interest rate to lower debt servicing costs.

 We should see soon what happens next when IRs reach zeros and debt is still growing. 

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56 minutes ago, Democorruptcy said:

That's what you could do with lower housing costs. Our Governbankment want the opposite, higher living costs to be be paid for by more people in a house, working more hours per week for more years and retirement a carrot on a continually extending stick. The bankers would lobby against a shorter working week.

Yep,its all planned.The only way to make people work forever and pay tax to fund the massive welfare system (that diverts middle class tax through the welfare class to the rentiers) is to keep people in huge mortgage debt and make sure they dont get any capital passed down to them.

The house price insanity is just part one.The next part is making sure capital cant be passed down by ordinary people.If someone pays a house off by 45/50 has investments and then gets an inheritance they can retire.The government need to stop this.They need the middle to work forever and not be able to build up/pass on capital.The tricky bit is stopping the boomer wealth passing down.Care home fees i expect being pre-funded and a charge on the house by the government.

Productivity is going nowhere.No company will invest when the return on equity is low.No worker will push for better pay when tax credits make it worthless.

They have created a system that doesnt reward work,doesnt reward saving,doesnt reward investment,but does reward breeding,making up fake illness,employing people on 0 hours contracts and keeping within tax limits.

The only productivity anyone in the UK should care about is their own free time.Everyone should be aiming to do the least possible.The budget showed the tax base is being destroyed and i think this will speed up.We need massive reform,yet get none.

Edited by durhamborn

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^

From the cipd link

 

Quote

 

On skills:

CIPD Skills Adviser Lizzie Crowley, said:

“It’s great to see recognition that tackling the UK's skills challenges is a top priority. With a significant slowdown in workers coming from the EU, upskilling the UK’s existing workforce and the next generation is more vital than ever.

“Technical education has been a longstanding weakness in the UK skills system. Additional investment to help to equip the next generation of workers with technical skills is therefore very welcome as we head towards post-Brexit Britain.

 

Technical education has been ok but what has been a longstanding weakness is availability of satisfactory technical jobs in the UK after that education.  

It's the UK she's referring to which is banker country nothing more and nothing less.  Typically she doesn't seem to have given the technical sector even a sniff in her own education and career.

Edited by billybong

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20 minutes ago, billybong said:

^

From the cipd link

 

Technical eduction has been ok but what has been a longstanding weakness is availability of satisfactory technical jobs in the UK after that education.  

It's the UK she's referring to which is banker country nothing more and nothing less.  Typically she doesn't seem to have given the technical sector even a sniff in her own education and career.

Exactly.When they closed the pits we had a few companies around the north who were working on carbon capture technology for coal power plants.They were world leaders because nobody else was really looking.Instead of keeping the pits open and investing in the technology they government shut them and killed the carbon capture industry as well.In just one town,Easington,i reckon the benefit bill since the closure has been £70 million+,and that not counting lost tax from other business.

You only need to look at Osborne's new job to see where the priority is in this country.Bankers.

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2 hours ago, moneyfornothing said:

I have made the case before , the only meaningful solution is to legislate lower weekly hours , 4 day week the new norm ?

4 day week should be brought in at once. Absolutely no need in this day and age for people to still be on 5 days standard.

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1 hour ago, durhamborn said:

Yep,its all planned.The only way to make people work forever and pay tax to fund the massive welfare system (that diverts middle class tax through the welfare class to the rentiers) is to keep people in huge mortgage debt and make sure they dont get any capital passed down to them.

The house price insanity is just part one.The next part is making sure capital cant be passed down by ordinary people.If someone pays a house off by 45/50 has investments and then gets an inheritance they can retire.The government need to stop this.They need the middle to work forever and not be able to build up/pass on capital.The tricky bit is stopping the boomer wealth passing down.Care home fees i expect being pre-funded and a charge on the house by the government.

Productivity is going nowhere.No company will invest when the return on equity is low.No worker will push for better pay when tax credits make it worthless.

They have created a system that doesnt reward work,doesnt reward saving,doesnt reward investment,but does reward breeding,making up fake illness,employing people on 0 hours contracts and keeping within tax limits.

The only productivity anyone in the UK should care about is their own free time.Everyone should be aiming to do the least possible.The budget showed the tax base is being destroyed and i think this will speed up.We need massive reform,yet get none.

Yes. Very depressing reading.

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On 09/03/2017 at 10:40 AM, Hectors House said:

which highlights the folly of buying in skills via employing migrants

You've editorialised a wee bit...

Skilled migrants are required, simply.

The 'corrective course' proposed in the CITB paper is in the scale of decades to bring the UK up to a reasonable standard... and at huge financial cost to UK citizens... if it is even attainable.

So there is actually no 'folly' as you've put it. It's the reality of contemporary UK and western civilisation.

Business won't accept big gaps in the chain. And the exchequer won't accept big dips in rates.

The folly is in globalisation, technology, and the failing our own government for turning the last few of generations of Brits into financial services wannabees... and the ongoing lowering of UK indigenous education standards.

Edited by cashinmattress

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5 hours ago, TheCountOfNowhere said:

so the first thing you do when you get to work is get o n the internet forums...

I could probably double productivity in any office based firm in one day.

 

:lol::lol::lol:

:lol:

Day off today! Compressed hours, innit. Flexible working, supposed to increase productivity...

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The budget showed the tax base is being destroyed

I must admit that this particular aspect of 'flexible' labour polices had never occured to me- but it seems turning people into  'self employed' disposable workers has this downside of making it hard to collect tax. PAYE was perfect because your targets were sitting ducks- but the one thing the precariat might have going for them is that the very incoherence of their working lives makes them harder to keep track of for tax purposes.

So now the Tories exhibit a textbook example of being hoist by your own petard because their ideological fetishisation of 'the entrepreneur ' is in direct conflict with their need to continue to fleece the proles while protecting the wealthy from taxation. The joke being-of course- that the recent increase in self employment is not really an outbreak of  entrepreneurial spirit among the plebian classes- it's more a symptom of the ongoing collapse of any organised opposition to the total commoditisation of work and workers- the zero hours contract-being an oxymoron- is the perfect icon of this surreal world view in which a complete lack of power and choice  are rebranded as the ultimate in self determination and control- 'self employment'.

I have been self employed most of my working life selling my skills in the marketplace, so I know what that term is supposed to mean, and being an utterly disposable and replacable cog on a zero hours contract is not 'self employment' in any real sense of that term- and it's insulting to those who work under such conditions to pretend otherwise.

It's hard not to take some grim satisfaction from the fact that, having spent decades trying to create a huge precariat in the name of neo- liberal flexible labour policies the elite are discovering that their ability to tax that huge precariat is now problematic- karma really is a bitch.

Edited by wonderpup

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5 minutes ago, wonderpup said:

I must admit that this particular aspect of 'flexible' labour polices had never occured to me- but it seems turning people into  'self employed' disposable workers has this downside of making it hard to collect tax. PAYE was perfect because your targets were sitting ducks- but the one thing the precariat might have going for them is that the very incoherence of their working lives makes them harder to keep track of for tax purposes.

So now the Tories exhibit a textbook example of being hoist by your own petard because their ideological fetishisation of 'the entrepreneur ' is in direct conflict with their need to continue to fleece the proles while protecting the wealthy from taxation. The joke being-of course- that the recent increase in self employment is not really an outbreak of  entrepreneurial spirit among the plebian classes- it's more a symptom of ongoing collapse of any organised opposition to the total commoditisation of work and workers- the zero hours contract-being an oxymoron- is the perfect icon of this surreal world view in which a complete lack of power and choice  are rebranded as the ultimate in self determination and control- 'self employment'.

I have been self employed most of my working life selling my skills in the marketplace, so I know what that term is supposed to mean, and being an utterly disposable and replacable cog on a zero hours contract is not 'self employment' in any real sense of that term- and it's insulting to those who work under such conditions to pretend otherwise.

It's hard not to take some grim satisfaction from the fact that, having spent decades trying to create a huge precariat in the name of neo- liberal flexible labour policies the elite are discovering that their ability to tax that huge precariat is now problematic- karma really is a bitch.

I think it is as much to do with the fact that the median earnings of the self employed are under £11,000 per annum. There's not much to tax, although that has not stopped the Chancellor having a go (albeit only for those earning in excess of a whopping £16,000 per annum).

I'm sure it's a bit more complicated than that but as a cohort their pay seems very low. The "jobs miracle" is most definitely not translated into tax receipts.

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9 hours ago, durhamborn said:

Yep,its all planned.The only way to make people work forever and pay tax to fund the massive welfare system (that diverts middle class tax through the welfare class to the rentiers) is to keep people in huge mortgage debt and make sure they dont get any capital passed down to them.

The house price insanity is just part one.The next part is making sure capital cant be passed down by ordinary people.If someone pays a house off by 45/50 has investments and then gets an inheritance they can retire.The government need to stop this.They need the middle to work forever and not be able to build up/pass on capital.The tricky bit is stopping the boomer wealth passing down.Care home fees i expect being pre-funded and a charge on the house by the government.

Productivity is going nowhere.No company will invest when the return on equity is low.No worker will push for better pay when tax credits make it worthless.

They have created a system that doesnt reward work,doesnt reward saving,doesnt reward investment,but does reward breeding,making up fake illness,employing people on 0 hours contracts and keeping within tax limits.

The only productivity anyone in the UK should care about is their own free time.Everyone should be aiming to do the least possible.The budget showed the tax base is being destroyed and i think this will speed up.We need massive reform,yet get none.

Spot on. Very depressing to read until the last paragraph which offers a solution to individuals.

Until the late 90's when my unsupportive ex husband left home I was quite naive about life. I thought if you worked hard you'd be ok. I was wrong to think this way. To cut a long story short I realised that I was a fool trying to be a single mother and work full time.

In due course I found part time jobs topped up with tax credits that provided me with almost as much as full time work and I had more time for the other demands in my life.

I know some forum members frown on single mothers on tax credits but it never entered my head that I would claim benefits until I was divorced 18 years ago. Then, due to the scarcity of decent paying jobs, I was forced by being rational to choose this route. 

IMO, in an area with low wages, I would have been a mug to try and soldier on!

I've no idea what is going to happen in the uk but I can't see work paying for the majority in the near future and I can understand why you would make your life choices. IMO more and more people will attempt to escape the work till you drop life that's on offer for most these days.

I really respect your posts DB, very informative. Ta!

 

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