Link pay to price rises and there’d be little call for strikes

It is now a year since they first voted for such action, marking the beginning of what has become the biggest strike wave in decades as unions fight the cost of living crisis. Although some disputes have been settled, others rumble on, especially in the public sector.

All told, the latest available figures show that from June 2022 to February 2023, just over three million days were not worked in Britain due to strike action. And, as inflation is not due to come down for some time yet, there will likely be many more days added to that total.

But it does not have to be this way. One half of the equation when it comes the cost of living crisis is prices.

It may surprise some to know that Britain used to have far more extensive price controls than we have today, covering foodstuffs, fuel and rent in particular.

The neoliberal ideology of the “free market” wants us to forget this and be happy with our very limited “light touch” regulation of the likes of energy prices and the cost of stamps and train tickets.

The other half of the equation is income – wages for most of us. Here, it is possible to have indexation of wages to prices, whether prices are controlled or not. If the indexation was set correctly, wages would rise according to prices rise so that this would take away the need for striking for pay increases.

It all sounds a bit pie in the sky, doesn’t it? But there is much historical and contemporary evidence to show that it is not.

One means is the sliding scale of wages which consists of increasing wages as the prices rise in order to maintain the purchasing power of the workers even if there is inflation. It was used in France between 1952-82 and in Italy between1945-92.

If that sounds a bit too “old school”, then we should note that since 2013 salaries of employees of the institutions of the European Union have been linked to the rate of inflation of Belgium and Luxembourg.

Currently, a number of countries in continental Europe – Belgium, Cyprus, France, Luxembourg, Malta, Slovenia and Spain – use wage indexation systems covering different proportions of workers in each country.

Belgium and Luxembourg have almost complete coverage, whether workers work in the private or public sectors. Other countries, such as Cyprus and Spain, have around two-thirds coverage. Greece, Finland and Italy have non-statutory guidelines.

Little Luxembourg is the link between the historical and the contemporary.

In 1975, it extended the principle of index-linking that had been applied to the pay of established civil servants since 1963 to cover all employees.

This continues to the present day.

Details differ between countries in terms of what items are in the basket upon which the rate of inflation is measured. That said, the broad principle has been established, with the practice working for some time where it has not been a temporary knee-jerk response to economic crises.

All this suggests that being inside the European Union is not a barrier to state intervention in the labour market. Of course, neither does being outside the European Union prevent this.

What does this mean for Scotland? Whether inside or outside the European Union, an independent Scotland could, if it wished, follow the example of these other sovereign countries.

But as the prospects for independence seem somewhat shrunken for the foreseeable future some innovative and creative thinking needs to be done on building a bridge between the present devolved Scotland and the future independent Scotland.

The obvious starting point is the Scottish Government’s Fair Work programme.

Wage indexation can easily be accommodated as an idea within several of its dimensions such as respect and security.

The most obvious place to proceed from is the public sector for which the Scottish Government is responsible directly as the employer (like the civil service) and indirectly as the funding provider (like health and education).

The same could be said of where the Scottish Government awards contracts to private-sector companies or provides funding to third-sector organisations.

Wage indexation in these cases would help set a useful precedent for wider future practice. But whether in the present or the future, it would have to be applied differentially so that current disparities in purchasing power are not maintained.

This means a higher level of indexation for the lower paid so that the working poor are lifted out of their poverty rather than kept in their relative poverty.

Professor Gregor Gall is a visiting professor of industrial relations at the University of Leeds and author of the forthcoming Mick Lynch: The making of a working-class hero (Manchester University Press).