GOOD CAPITALISM: WAGES AND THE LABOUR MARKET

Purchasing power, the central source of demand in developed economies, should be based on a relatively balanced distribution of income, and not on an expansion of consumer credit. Several measures are needed to achieve a balanced distribution of income: first, a reversal of the long-term trend towards a falling labour share of income, which is due chiefly to the financial system’s growing power, virtually uncontrolled proliferation and increasing hunger for risk and profit. Second, the wage structure would need to be modified in such a way as to raise lower-bracket wages. Third, the state would need to use tax and spending policies, including provision of public goods, to intervene in the market-driven distribution of income. Statutory social security systems would have an important – but not the only – role to play here.

What needs to be done

• Wage development needs to be linked to overall productivity development, as well as to the target inflation rate set by the central bank
• Adoption of unified and statutory minimum wages as a means of restricting inequalities in income distribution and preventing deflationary risks
• Measures to strengthen the instrument of the industry-wide wage agreement: compulsory membership in employers’ associations or decisions establishing the industry-wide applicability of collective wage agreements
• Measures to strengthen workers’ rights of codetermination at the company level
• Measures to condition the award of public contracts on fulfilment of minimum standards for wages and working conditions
• Creation of a common unemployment insurance system at the level of European Monetary Union (EMU), aimed, among other things, at strengthening regional coherence
• Adoption of a European minimum wage anchor (with the minimum wage set at 60 per cent of the national average wage) and establishment of a European Minimum Wage Commission
• Coordination of wage policy on the basis of a set of European wage guidelines
• Support for the development of Europe-wide trade unions, employers’ associations and collective bargaining