Labor may enjoy a few more fruits

Stephen Beard Jan 5, 2007

KAI RYSSDAL: Today’s job numbers should give people looking for work a boost. Not only did the economy add 167,000 new jobs, but average wages were up as well. More than 4 percent over the past year. Which means paychecks are beating inflation for a change. And it could be a sign of things to come. Not just for American workers, but in Europe and Japan as well. From London, Marketplace’s Stephen Beard reports workers could be in for a bigger slice of the prosperity pie.

STEPHEN BEARD: Over the past decade, the pendulum of economic power has swung towards capital and away from labor.

ANDREW HILTON: There’s no doubt that over the last few years the average working stiff has been stuffed.

Economist Andrew Hilton says that company profits have soared but wage raises have lagged behind. The workers really have been downtrodden, the bosses riding high:

HILTON: The rich have got richer. And the middle and working classes have, at best, held their own. In many cases at the poorer end of the society incomes have actually fallen.

But this year the pendulum could start swinging in the other direction, says investment analyst Julian Jessop.

JULIAN JESSOP: There are signs that labor is starting to fight back. Falling unemployment in most major economies is encouraging more aggressive wage demands.

Germany’s most powerful labor union I.G. Metall has demanded up to 7 percent for 3 million workers. British unions are upping the ante as well. The political winds are also blowing in favor of labor. Pro-union governments have taken power in Italy and Spain. And, says Andrew Hilton, the backlash against capital is even underway in the bastion of capitalism:

HILTON: In the U.S. the shift of control of Congress from the Republicans to the Democrats is likely to have an impact on this. People like Representative Barney Frank is already scheduling hearings on the widening income disparities within the U.S.

A higher minimum wage in the U.S. is now likely this year. Labor unions around the world are quietly confident 2007 could be payback time. Or at least time for companies to pay up. Richard Exell of the TUC, the British equivalent of the AFL-CIO:

RICHARD EXELL: The improvements that we are expecting to see in the coming year are really overdue. And it is time for workers to get their share of the increased prosperity.

But it might be too soon for the workers to celebrate. One of the key factors holding back the wages of lower paid employees has been technology. And that hasn’t gone away, says Julian Jessop.

JESSOP: Many low-skilled workers are finding it harder and harder to get a job because computers can do their work for them. So that’s squeezed the wages of many low-skilled workers at the bottom of the chain.

And there’s another downward pressure on wages that hasn’t gone away, says Andrew Hilton: The huge competitive threat from low-wage economies like China — even though the Chinese leaders are now pushing up pay rates and promoting union membership.

HILTON: Chinese workers work for 60 cents an hour. Even if they were to work for $1.50 an hour, their productivity is increasing so fast, that it will still depress labor costs in the developed countries.

The pendulum may be swinging back from capital to labor, he says, but it won’t swing back very far.

In London, this is Stephen Beard for Marketplace.

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