Young workers bear the brunt of capitalist crisis

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Many working parents aren't earning enough to support their families adequately
Many working parents aren't earning enough to support their families adequately

Ten years after the global financial crash, capitalism is proving incapable of providing adequate living standards for the mass of the working class in Britain. An annual report by the Institute for Fiscal Studies (IFS) shows that the burden of the crisis has been heaped onto the poor, and young workers in particular. In contrast, the amount of national income taken home by the top 1%, or households with annual incomes of £275,000 or more, has risen from 7% to 8.5%, meaning they have recovered the ground they lost in the aftermath of the last recession. According to Living standards, poverty and inequality in the UK: 2017, median incomes are at record levels; the ONS says the wealthiest tenth of households in Britain own 45% of the nation’s wealth – the poorest half just 8.7%. This vast inequality accompanies stagnant poverty rates; relative poverty* is 22%, representing no improvement since 2000-01. Matt Glass reports.

On 22 September, Conservative Prime Minister Theresa May boasted that ‘employment – people in work; people taking home a wage, a salary, to support their family – is at record levels, the highest levels since records began’. With unemployment at 4.3% in May-July 2017, this is technically true, but in-work poverty is also at a record high. In 1995-96 45% of non-pensioners in relative poverty were in a working household. This has risen to two thirds. In 1990, 20% of children in working families were in poverty. That figure stands at 24% for 2015-16.

Young and poor

The government’s claim that it is ‘making work pay’ is not true for young people. Since the financial crash, median income for the over-60s is up by 10%. Pensioners are now less likely than children and working-age people to be in relative poverty. This is a huge reversal since 1961, when despite making up only 14% of the population, pensioners comprised 40% of those in poverty. Now they make up 19% of the population but comprise 16% of those in poverty. This explains why pensioners, the age group most likely to vote, overwhelmingly supported the Conservatives in June’s election. The pension triple lock in particular has been used by the Tories to buy pensioner votes.

In contrast, the income of 22–30-year-olds is down by 7% since 2007-08. This cohort of workers saw a much larger reduction in employment from 2007–08 to 2012–13 – four percentage points – compared with 0.1 percentage points for older workers. 31–59-year-olds are now employed at a much higher rate than before the recession, while employment rates for 22–30 year olds have only just recovered to pre-recession levels. However, such employment is at reduced wages – 12% below 2007-08 levels in real terms. Older workers have seen a 2% reduction. This shows how the financial crisis served to restore profitability to the companies that survived the crash – they can now get away with paying much lower wages, at the expense of young workers in particular.

Contrary to May’s claim, many working parents aren’t earning enough to support their families adequately. Over a quarter of people using Trussell Trust foodbanks cited low income as the primary reason for doing so.

Full employment?

Even with the record employment rate, Britain’s capitalist economy is incapable of providing all those willing and able with work; while unemployment was 4.3% for May-July, the rate of economic inactivity was much higher at 21.2%. This rate is defined as people who are not in employment and have not been seeking work within the last four weeks, and/or are unable to start work within the next two weeks. The Joseph Rowntree Foundation calculates that 18% (5.4 million people) of the labour force is either economically inactive but would like to work, or underemployed. Many ‘inactive’ people are, for example, kept out of work due to lack of affordable child care.

The IFS forecasts little to no increase in standards of living for the general population, largely due to Brexit and the related inflation expected, benefit cuts, and the fact that employment won’t grow further. The report’s advice to policy makers is to ‘address persistently low earnings’.

Otherwise, as the report itself recognises: ‘If real earnings grow as the Office for Budget Responsibility forecasts, high-income households will benefit more than lower-income ones. And if benefit cuts proceed as planned, they will act to significantly reduce the incomes of low-income working-age households.’

*Relative poverty generally means that a person can't afford an ‘ordinary living pattern’ – they are excluded from the activities and opportunities that the average person enjoys. A household is in relative poverty (also called relative low income) if its income is below 60% of the median household income.

Fight Racism! Fight Imperialism! 260 October/November 2017