Rethinking Recovery: Recovery for whom?

04 July 2016 

Genevieve LeBaron - Research Fellow at SPERI and Senior Lecturer in Politics

Corporate profits are soaring, but so is labour exploitation. Who is the ‘recovery’ really benefiting?

Has the labour market ‘recovered’ since the 2008-09 financial crisis? The answer to this question depends on whom you ask.

The labour market is a central part of the UK’s ‘economic recovery’ narrative advanced by political and economic elites. In his address on June 27th to reassure the markets amidst the turmoil caused by Brexit the Chancellor George Osborne cited that ‘the employment rate is at a record high’ as evidence of the strength of the ‘rebuilt’ UK economy.

Likewise, official national statistics tell a story of steady improvement. In the wake of the UK’s economic downturn, unemployment soared, peaking at 8.4% in 2011, the highest jobless rate in nearly two decades. Today, unemployment is at a ten-year low. Productivity indicators such as output per worker and output per hour dipped sharply in 2009 but have now surpassed pre-crisis levels. The redundancy rate has gone from 12.2% in 2009 to 4.1% in 2016. And the claimant count (of those claiming unemployment benefits) has fallen from roughly 1.6 million in 2012 to 737,800 in April 2016.

But scratch beneath the surface of these statistics and you’ll find that official measures of national economic recovery have not translated into concrete improvements for UK workers. Rather, real wages have fallen sharply, there has been a sharp rise in wage theft amongst low paid workers, and the number of workers on zero-hours contracts has skyrocketed. There have been increases in reports of forced labour and human trafficking within the UK, as well as incidences of exploitation, particularly of migrant workers. In short, recovery policy has only intensified the ‘relentless slide toward a low-pay Britain’.

The UK government has spent over £500 billion in bailout funds to achieve economic recovery, and hundreds of billions have also been provided by the Obama administration. Where has that money gone, if not to working people?  One clear winner is big business.  Aided by a corporate welfare regime, since the financial crisis, corporate profits have climbed steadily. In the US in 2014, according to The New York Times, ‘corporate profits [were] at their highest level in at least 85 years.’ That same year, ‘total compensation of employees slipped to a 65-year low.’  In other words, corporate profits have recovered, but those profits have not been passed onto workers.  Rather, workers— and particularly low waged workers— have been left unprotected and struggling, battling wages, downward pressure on working conditions, and endemic exploitation.

UK labour market dynamics are in line with regional and global trends. Governments around the world have enacted labour market reforms to spur growth and bailout business; these have bolstered corporate profits, at the same time as work has become increasingly insecure and poorly paid.  A recent study of 19 European countries found that since the crisis, ‘governments across the EU have increased labour market flexibility by weakening and removing employee protections.’ The International Labour Organization has warned that large proportions of new jobs created since the crisis are concentrated in sectors that do not pay well and leave workers vulnerable to abuse.

Further evidence of how workers are taking home a surprisingly small share of the pie is provided by Apple. In 2015 the company revealed that it had US$203 billion in cash and in the same year acknowledged widespread ‘bonded servitude’ in the factories that make up its global supply chain. One recent study of value distribution for the iPhone found that while Apple takes home 58.5% in profit, its global labour force now holds onto a mere 5.3%.

Simply put, there is mounting evidence not only that recovery has failed to improve conditions for workers—it has actually been achieved by decreasing wages and labour standards across many industries and regions of the world.

This dynamic was confirmed by a body of research presented at a recent workshop at the University of Sheffield that gathered academics and experts from across the UK to explore the impact of recovery wages and working conditions. For instance, research by Nik Hammer at the University of Leicester documented that 75-90% of the employees in Leicester’s booming garment industry are paid £3 per hour (less than half of the minimum wage). Another paper by Francesca Feruglia of Nazdeek demonstrated that although tea industry profits have increased in recent years, tea workers receive US$1.89 (well under the industry’s legal minimum of US$3.60) and are frequently victims of forced labour.

Taken as a whole, the research raised the concern that the financial crisis and associated recovery policies are now translating into a labour market crisis, as businesses have attempted to cut labour costs (in part by increasing agency and temporary workers, migrant workers, and through bogus self-employment), avoid pension-fund obligations, and undermine workers rights to pay, benefits, and bargaining.

To further explore these dynamics, I have commissioned a series of articles on these themes to be published jointly by SPERI and openDemocracy’s Beyond Trafficking and Slavery. Over the coming weeks, the series will tackle the impact of recovery policy on the UK labour market, and assess labour conditions in global supply chains led by UK-based retail firms, and major brands and industries familiar to UK consumers.

My hope for the series is that it will deepen understandings of the differentiated impact of recovery policy on business and workers, as well as across diverse segments of the labour market. Finally, I hope that the series will begin to chart new ways of thinking that move us beyond ‘recovery through regressive redistribution’ and seek to stimulate prosperity in more equitable ways.

Rethinking Recovery: This series is supported by a UK Economic and Social Research Council seminar series grant, ‘From REcovery to DIScovery: Opening the Debate on Alternatives to Financialisation.’

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