Tough at the top? Not really

Capitalists love touting the benefits of trickle-down economics. It is a rationalization of inequality. By linking the welfare of the working-class  directly to the prosperity of the rich, they can protect the interests of corporations and the wealthy without the fear of backlash.

The investment banking hierarchy is essentially a large bureaucracy. At the bottom are the manual unskilled maintenance staff like security guards, the janitors and the cleaners who keep the offices safe and warm and clean. Then there are the administrative assistants, who support several bankers at one time and make about $35,000 a year. Above them are the analysts, college graduates whose life consists of 120-hour work weeks and an endless stream of menial tasks for $65,000 to $90,000 a year. Next up, and supported by the analysts, are the associates -- freshly minted MBAs with more than a $100,000 in school loans hanging over them -- who can look forward to taking home between $100,000 and $175,000 a year. If these young men and women, who work 90-hour weeks while trying to juggle a family, survive long enough to become vice presidents, their compensation can rise to $200,000-$300,000 per year.

Above the vice presidents are the directors, which is a training zone for the next pay grade (or a graveyard for those who don't have what it takes). Directors rely on the workers below them to do all the grunt work, including research, financial analysis, and client presentations, while they mainly babysit clients and occasionally come up with ideas to pitch to them. Their pay for these relatively cushy tasks ranges from $350,000 to $500,000 per year; but even this is meager compared to what their superiors make. Managing directors, who work even less and spend more time golfing instead, can make anywhere from a million to several million dollars a year.

Finally you have the really big fish -- the CEOs, presidents, executive vice presidents, and others who manage the entire circus, think deep thoughts, and schmooze with politicians to get regulations loosened. What makes these gigs so coveted is not just the fact that few ever manage to join that echelon but that the pay-scale jumps to tens of millions of dollars (even hundreds of millions) per year for work that is only moderately more challenging than that of the managing directors. It may be lonely at the top, but it's  lucrative.

It should be clear from the above that the wealth generated in these organizations gathers mainly at the top of the pyramid, while the people at the bottom, who do a lot of the heavy lifting and are instrumental in building that wealth, receive only a fraction of those riches. Sure, the pay scales in investment banking are pretty good by the standards of other industries, but it is the proportional difference between the compensation at the top and the bottom that makes a difference. This large income gap leads to an exponentially faster accumulation of wealth in a few hands, which in turn widens the prosperity gap even more. In other words, prosperity is not really trickling down but trickling up.

The more wealth trickles up in the capitalist system, the more it frustrates those at the bottom -- without whose efforts that wealth could not be created in the first place.

Taken from here

A living wage or no wages?

According to research by Citizens Advice Scotland workers in Scotland are routinely being exploited by employers who are refusing to pay the minimum wage. The problem is particularly prevalent among young employees, while hotels, restaurants and cafes are the worst offenders.

Susan McPhee, head of policy at CAS, said: “The minimum wage has been law for more than 10 years, but a significant number of employers are refusing to pay it, and as a result workers are exploited on illegal wages. All political parties* accept the principle of a minimum wage, but it seems some employers believe the law is optional. Our experience shows many workers are unaware of their rights or lack confidence in how to fight for them.”

The National Minimum Wage was made UK law in April 1999 and is currently £6.08 an hour for those aged over 21. It lowers to £4.98 for those between the ages of 18 and 21. For 16 and 17-year-olds, the threshold is £3.68. HM Revenue and Customs (HMRC) has the powers to issue a notice of underpayment if an employer is found to be flouting the legal threshold, and employers face a fine to HMRC of 50% of the total underpayment that has occurred since April 2009. The minimum penalty is £100 and the maximum £5000.

* Not all. The Socialist Party doesn't.

We have nothing against workers struggling for and getting higher wages if they can. We favour this, even if we don’t like the term “living wage” any more than “fair wage" and even if we think that ideally this should be tied to struggling to abolish the wages system altogether. What we criticise is to increase the present legal minimum wage and call the result a “living wage”.

First Minister Alex Salmond has spoken in favour of a “living wage” of £7.15 per hour for Holyrood employees. Presumably Salmond has in mind is a wage that would allow a worker to afford decent housing, enough proper food, new clothes, to go on holiday and run a car. Getting employers to increase the wages of anyone paid less £ 7.15 is easier said than done. The unions haven’t been able to do it. Like all reforms of capitalism the minimum wage legislation leaves intact the basic mechanism wherein a small handful live of the surplus value produced by the working class. However even by comparison with previous capitalist reforms this piece of legislation has proved woefully unsuccessful. We pointed out that this was just another empty vote-catching promise which, even if implemented, wouldn’t have had the expected effects.

But let’s assume for a moment that a law forcing employers to pay a higher minimum wage was passed. What would happen?

First, some employers would go bankrupt. Others would withdraw their capital from producing certain goods or services, so their price would rise. Eventually this would stabilise at a new, higher level at which employers would be able to make a profit even when paying the increased minimum wage. So the cost of living would go up, including for workers on the minimum wage. Second, given the increased labour costs, the introduction of previously unused labour-saving machinery would become cheaper vis-à-vis employing living labour. It is generally accepted that higher wages does lead employers to introduce machinery. Employers would do this. So there’d be job losses and unemployment, particularly amongst the unskilled, would grow.

Nor did Marx think much of such demands as “fixing the minimum wage by law”, which was one of the reform demands of the French Workers Party he had a hand in helping to set up in 1880. He wrote, referring to the proposer of this: “I told him: ‘If the French proletariat is still so childish as to require such bait, it is not worth while drawing up any program whatever.' "

Like all reforms of capitalism the minimum wage legislation leaves intact the basic mechanism wherein a small handful live of the surplus value produced by the working class. Socialism is not about redistributing income and wealth from the rich to the poor, but about establishing a society that would not be divided into rich and poor. To adapt Marx, workers should replace the demand for a “Living Wage” by the revolutionary demand for the “Abolition of the Wages System”.

wages or jobs?

Cuts in public spending could wipe out up to 125,000 jobs in Scotland – about 5% of the working population – within the next financial year, union leaders have warned. Unison, said 60,000 public-sector and 65,000 private-sector jobs could be lost north of the Border because of spending cuts.

“The recruitment freeze is already condemning a generation of young people – many of whom have trained for years – to unemployment..." the union explained

Aberdeen City Council's SNP-LibDem coalition voted in December to begin negotiating with the unions about a 5% pay reduction, which would remove the need to shed about 1000 members of staff.

reforms fail to reform

On the 40th anniversary of the Equal Pay Act figures have been released to show that women in Scotland will have to wait another 33 years before they are paid the same as men. Male managers earned on average £9,841 more than female colleagues.Even at junior management level, the pay gap still existed, with men being paid £797 more than female executives in Scotland.

Concerning the UK stats generally a spokesman for the Equality and Human Rights Commission said: "Forty years after the Equal Pay Act, women can still expect to earn less than 85 pence for every £1their male colleagues earn. In some sectors the pay gap is far worse."

Socialist Courier can only comment that it once more demonstrates the failure of those that advocate reformism.

one rule for them , another rule for us 2

We read
Scottish Water's chief executive, Richard Ackroyd earns a basic salary of £263,000 plus a 40 per cent bonus.
Junior employees at Scottish Water have bonuses limited to around 5 per cent of their salary.

ethical exploitation

The "ethical" fish restaurant group, Loch Fyne, pays staff salaries below the minimum wage . Loch Fyne champions marine conservation, and proclaims a corporate philosophy of "an enterprise with respect for animals, people and ecology." according to the BBC
It relies on customer tips to boost total pay to a lawful level . Staff at Loch Fyne Restaurants say they are on a salary of £5.05 an hour, compared with the legal minimum wage of £5.52. The Unite union called the company's behaviour "appalling", and said all restaurant staff should be on a minimum wage salary, as well as getting a fair share of tips. Restaurants are legally allowed to include tips in the calculation of employees earnings, but the practice has been criticised as unethical.
The BBC also revealed that salaries at the Hard Rock Cafe in London were less than half the minimum wage, with waiters on £2.06 an hour

Worse to come

While MPs vote to retain their 2nd home additional expenses allowance of 24,000 pounds , it was revealed that the spiralling cost of living has left Britons 15 per cent worse off than they were five years ago, according to research published. Households were now left with an average of £772.79 to spend each month after paying their fixed monthly outgoings – down from £909.84 in 2003. The report found fixed monthly household costs had soared by nearly 45 per cent during the past five years, to take up 53 per cent of people's total pay. Homeowners were shelling out 78 per cent more in mortgage repayments than in 2003-4 at an average of £735 a month, due to a combination of higher interest rates and people taking out bigger mortgages.Monthly energy bills have leapt by 110 per cent during the period to an average of £95.80, while petrol costs for the typical family are 29 per cent higher at £193.61.

"Many UK consumer segments are feeling the pinch as big rises in household costs outstrip relatively modest wage inflation.Consumers are painfully aware of hikes in petrol and utility bills, but we've also seen some hefty price increases in pension contributions and debt repayments. If we factor in food price inflation, which official figures have placed at 8.7 per cent in the past year, it's clear household budgets are under enormous strain. Add the impact of falling house prices and the consumer economy is undoubtedly on a knife edge."

Worst could still be to come, with utility prices expected to rise by up to 40 per cent this year.

Getting along wih less to go on

Average families have seen their disposable incomes drop by £8 a week in the past year, research suggests.

Although earnings rose by £23 a week, or 3.6%. that was outstripped by taxes, which rose 6.5%, and higher bills for essential items such as food and fuel. This week government figures showed that higher fuel and food bills had driven annual inflation to its highest level for 11 years.

The governor of the Bank of England, Mervyn King , also warned that real incomes would stagnate this coming year.

The Centre for Economics and Business Research said the average family had an income of £633 a week, which was 3.6% higher than May 2007. However, it found taxes and national insurance had risen by 6.5% over that time. Adding in the effect of more expensive essential spending - such as transport fares, utility bills, food, clothes and housing - meant that these families now had, typically, just £131 left to spend on other things - a drop of 6%.

Running forward to stand still

The average household is £5 a week worse off than last year. The cost of living rose by 4.9 per cent to £388 a week. Earnings also increased but soaring bills for essentials such as food and transport mean that disposable income has fallen to £138 a week according to research by the Centre for Economics and Business . the charity Credit Action, said:
“When you add together the increases in grocery bills, energy costs and the fact that all credit is getting more expensive, it means that the real cost of inflation is far above the Government’s measure."

CEBR carried out the research on behalf of the supermarket group Asda. It found that the average family had to pay 6.1 per cent more for food in January compared with January 2007, and 6.4 per cent more for transport. Petrol prices were nearly 20 per cent higher. Only a 4.8 per cent fall in the cost of clothing helped lessen the pressure on consumers’ wallets. Households in Wales have been worst affected by spiralling costs, the CEBR said. The average family has £45 a week to spend on leisure and recreation once weekly bills are met. This is more than 12 per cent less than they had to spend in January 2007.

FSA’s director of financial capability, said: “Economic conditions are getting tougher, putting pressure on family finances...."

Chief executive of Asda, said: “The latest figures indicate that 2008 is going to be a tough year for customers and confirms what we’ve known for some time: that household budgets are stretched to the limit.”

Credit Action said:“We are helping people whose finances are being squeezed significantly. They are not just worrying about mortgage repayments, but are struggling to cover the cost of living week to week.”

The ragged trousered philanthropists

Workers in Scotland are doing increasing amounts of unpaid overtime and would receive an extra £4517 a year if they were paid for the additional hours they are putting in, according the STUC.
The number of employees in Scotland working unpaid increased by 20,000 in 2007, bringing the total to 436,000. The average amount of unpaid overtime is six hours and 54 minutes a week.
The STUC has calculated that if everyone in the UK who works unpaid overtime did all their unpaid work at the start of the year, the first day they would get paid would be February 22.
The number of employees working unpaid overtime across the UK increased by 103,000 to nearly five million; about one in five of the working population. The average annual value of unpaid overtime in the UK is £4955 per employee.

"..today's figures suggest many people are not even being paid for putting in these extra hours.Workers in Scotland are giving away over £4500 a year in unpaid overtime. That's too much time and money that could be better spent with friends and family..." Grahame Smith, general secretary of the STUC said

Minimum Wages - Maximum Exploitation

Thousands of workers are being short-changed by firms who refuse to pay the national minimum wage, the TUC found .

Around 150,000 staff are being denied rate of £5.52 an hour for adults and £4.60 for 18 to 21-year-olds, it says. Those in restaurants, hotels, cleaning, hairdressing and childcare were said to be the most likely to be underpaid.
TUC general secretary Brendan Barber said: "There should be no hiding place for bosses who are deliberately cheating their workers out of the minimum wage."

Socialist Courier will go further and say all wages and wage labour is theft . That it is slavery . Within capitalism , the fight to improve wages is indispensible but workers should take the next step - campaign to abolish wages .

The property ladder

Research by the Bank of Scotland, found that young people faced a financial struggle to own property, with the average price paid by first-time buyers soaring 113% from £57,929 in 2002 to £123,213 this year. With the threshold set at £125,000, many first-time buyers paying more than the average price of £123,213 will have to find an extra 1% of their property price on stamp duty.
The average property is now out of reach of first-time buyers in 95% of places, according to the fifth annual First Time Buyer Review. Edinburgh and Helensburgh are the least affordable places for first-time buyers and properties there are 8.2 and 7.5 times the average income of a first-time buyer household. The deposit required by first-time buyers has soared 238% since 2002 and the average amount put down for a first property in Scotland is £25,951 - 95% of an average full-time worker's salary. Five years ago it was only 35% of an average worker's full-time earnings.

"It is beyond the reach of people who are earning between £12,000 and £16,000 a year to save up for that kind of deposit. " Peter Kelly, director of the Poverty Alliance said. "People are putting themselves in more risky positions and it will be people who are on the low end of the income scale who will pay the price for that."

Housing charity Shelter Scotland said that an additional 30,000 affordable rented homes, not including general housebuilding, were needed by 2011. It said that more than 200,000 people were on waiting lists and 9000 households were in temporary accommodation in March this year.

For a socialist take on housing read Building Profits Versus Building Houses

And for a more recent article on the house property price bubble read here

Nor should we think of the lack of shelter as just a Scottish problem , of course .

A man, believed to be in his sixties, was found dead on a wooden pallet in the Place de la Concorde in the heart of Paris victims of homelessness and the cold . Another man, 62, was found dead in his car in Vanves, just west of the capital. The deaths have provoked new quarrels over the alleged failure of successive governments to provide lodgings for France's alleged 200,000 homeless people. One pressure group, Les Morts de la Rue (the dead on the street), claimed that at least 200 people, between 18 and 80, had died prematurely while sleeping rough in France in the past 12 months.

Jean-Paul Bolufer, the head of the private office of the Housing minister, Christine Boutin , said last month that it was "scandalous" that some relatively wealthy people lived in subsidised, publicly owned housing while others lived on the streets. a newspaper revealed that he was paying 1,200 Euros (£870) a month rent – a quarter of the market price – for a 190 square metre apartment in an upmarket area of the Left Bank. There were at "least 200,000" other well-off people living in subsidised flats in Paris, he said.

The Price of Learning

The principal of Glasgow University accepted a £23,000 pay rise in the past year - an increase of more than five times the rate of inflation. The 11% increase brings Sir Muir Russell's salary and pensions benefits to some £234,000 a year at a time when the rest of the university's staff have been given increases of just 4%. Last year's university accounts show the level of Sir Muir's remuneration package jumped from £184,000 in 2004-05 to £211,000 in the last financial year - a 15% rise. As part of his pension arrangements from his career in the civil service, Sir Muir, 59, will pocket a one-off payment of £215,000 when he turns 60.
He can also expect to have an annual pension of £65,000 waiting for him at age 65.

The latest increase is likely to make Sir Muir one of the highest-paid principals in the country, depending on the increases enjoyed by other university leaders which have not yet been revealed. Last year, the highest-paid principals in Scotland were Professor Duncan Rice from Aberdeen University (£215,000), Dr Brian Lang from St Andrews (£209,000), and Sir Alan Langlands from Dundee (£202,000).

"There is a growing feeling that universities are being turned into businesses in which the collegiality on which their past successes have depended is abandoned and senior managers are paid inflated salaries to get as much as possible out of their junior employees for as little reward as possible." - Terry Brotherstone, who is president of the lecturers' union UCU Scotland

Capitalism -Good for a very few - Bad for the many

THE average pay for directors of the UK's biggest firms has soared to £2.87 million after seeing their salary packages rise by over a third in the last year, as reported in the Edinburgh Evening News .

The 37 % rise outstrips average inflation of 2.3 % and is 11 times the increase in average employee pay of 4 % .

The total pay packages of the 1389 FTSE 100 company directors last year broke through the £1 billion barrier for the first time, totalling £1.01billion - enough for 15 hospitals or 50,000 nurses.

The top-paid UK executive was Bob Diamond, head of the investment banking arm of Barclays Bank, who earned £23 million. Although his basic salary was only £250,000, Mr Diamond was awarded a performance bonus of more than £10 million and over £12 million in share awards.

Bart Becht, chief executive of household cleaning company Reckitt Benckiser, was not far behind with a total package worth £22 million , nearly 80 per cent of the firm's total executive wage bill.

Among the other biggest earners were Giles Thorley, who heads the Punch Taverns pub group, which owns one in eight of all pubs in the UK and has more than 160 pubs in and around the Lothians. He took home a salary package of £11 million .

The highest paid woman, with a package worth £2.1million , was Dame Marjorie Scardino, chief executive of Financial Times publisher Pearson

Jann Brown, finance director at Edinburgh-based oil and gas explorer Cairn Energy, was the UK's third highest earning female executive, with a total salary package of £1.7 million.

Two Royal Bank of Scotland heavyweights also made the top ten in terms of the biggest cash bonuses paid out, with chief executive Sir Fred Goodwin bagging £2.8million and Johnny Cameron, chief executive of the RBS global banking and markets division, raking in £2.3 million.

Meanwhile the paper also reports :-

THE number of people declared bankrupt in Edinburgh has soared to almost ten a week, as rising interest rates start to bite. The number of people declared bankrupt in the Capital has nearly doubled in two years. Most cases involved people struggling with credit card or loan debts .

Debt management experts today warned the problem will worsen as homeowners come to the end of fixed-rate mortgages and house prices stabilise. Lenders are also being blamed for "exercising their muscle" by forcing people into court to be declared bankrupt, rather than letting them pursue voluntary insolvency.

Declining Wages

There is a maxim often espoused by apologists of Capitalism - that a rising tide lifts all boats , meaning that a bountiful capitalism will benefit all sectors of society , not just the capitalist class .

But where is the proof of the pudding.

Profits at British companies are growing at their fastest pace in nearly 13 years while wages of ordinary workers are rising at their slowest pace since 2002, official data showed today.

Office for National Statistics said profits increased by 16.2% in the second quarter of the year compared with a year earlier. That was the best figure since the final quarter of 1994, the profit rise was widespread across different types of company.

Meantime

Wages rose by a meagre 3.6%, the worst pace of growth since the first quarter of 2002.

And inflation - rose to 3.8%, the highest in more than a decade .

So in real terms we are 0.2% worse off

Darren Winder, chief economist at stockbrokers Cazenove said that the cash position and balance sheet of British business was stronger than ever.

"But with household debt now higher than annual GDP, workers may be showing more flexibility over pay rises because they need to keep their job and pay the mortgage."

Rich List and P*ssed

With the imminent publication of The Times 2007 Rich List , there will be many commentaries on it . The first i have read is from the BBC .

The fortunes of Britain's wealthiest 1,000 people grew 20% in a year .

The UK Office for National Statistics reported that average UK earnings including bonuses rose by 4.6 % in the year to February 2007 . Average earnings excluding bonuses on regular pay, rose by 3.6 % . The retail price index measure of inflation stands presently at 4.8%.

The £19 billion fortune of Indian steel magnate Lakshmi Mittal ensured he kept his title as Britain's richest person. Mr Mittal's fortune grew more than £4 billion from from £14.8 billion in 2006 .

The Duke of Westminster fortune grew from £6.6 billion to £7 billion.

Once again , the figures irrefutably confirm that the capitalist class are becoming increasingly richer and the working class are growing poorer and poorer .

Just some local news

The second 'Social Atlas' of the Borders just published by Scottish Borders Council.
Earnings in the Scottish Borders are about £80 a week below the national average .

Average income is just over £355 a week compared to £436 across Scotland.

SCOTTISH Executive defines households being in fuel poverty when they have to spend more than 10 per cent of their income on all household fuel, and while there are varying degrees of fuel poverty across the Borders it is generally widespread across the region.

The percentage of the population suffering chronic mental health problems continues to increase and over a twelve year period between 1992 and 2004 the percentage of the population taking prescribed anti-depressant drugs increased from 1.9% to 8.3%."According to Scottish Executive statistics, the Scottish Borders has the second highest rate of the population prescribed drugs for anxiety, depression or psychosis in Scotland, after Dundee City.

And talking of Dundee , data from the Tayside Economic Review 2005 showed that wages had fallen by 1.2% across the region, while the Scottish average increased by 3.1%.

So are we one Scotland ?