Living under capitalism in Britain today

In the pages of World Revolution we frequently refer to the attacks of the ruling class, often giving figures for the latest redundancies or the impact of the budget and other government measures. However, the true situation of the working class can only really be seen by taking a broader and longer look. This article aims to contribute to this by using official figures and a number of reports by business and voluntary organisations to try to delineate what some aspects of life are like for the working class today. Such information certainly has its flaws but it has always been important for revolutionaries to do what they can to understand the real conditions of life for the working class.

Employment and unemployment

The headline figures proclaimed by the state are that the number in work is higher than ever, hitting 28.8 million in 2005, with rises in the overall employment rate for both men and women, and that unemployment remains low at 4.7% (Labour Market Review 2006, Office for National Statistics). However, when considered in more detail these figures show that there have been substantial changes in the pattern of employment in Britain over the last 30 years and that these have been at the expense of the working class. In 1978 manufacturing accounted for 28% of jobs; by 2005 this had more than halved to 12%. In contrast services grew from 61% to 82% of jobs over the same period (ibid). For many this has been a shift from well-paid, permanent, full-time jobs to part-time, temporary jobs paid near to the minimum wage.

The gender composition of the workforce has also changed significantly with the decline of the employment rate of males from over 90% in 1971 to under 80% in 2005 being matched by the rise in female employment from about 56% to 70%, leaving the total employment rate stable at around 75% (ibid). However significant this may be in social terms, in economic terms it has reduced the cost of labour to the employer since women's pay is still only 87% of men's on average. Women make up the greatest proportion of those who earn less than £6.50 an hour, with 30% of all female workers in this bracket (Monitoring Poverty and Social Exclusion 2006, Joseph Rowntree Foundation).

Over the last 35 years unemployment has climbed and fallen. At the start of 1971 the rate was 3.9%. It rose to 12.1% in the first half of 1984, fell back at the end of the decade only to rise still further by the early 1990s before falling to 4.7% in late 2005. The various tricks used to hide the real level of unemployment, notably by changing the way unemployment is counted, have been covered many times even in the mainstream media. In order to address this Labour began to use a second measure based on the Labour Force Survey alongside the discredited claimant count. The new measure is usually higher than the old.

Another way of looking at this issue is to use the overall rates of employment and economic inactivity.

The overall level of employment went up slightly during this period but has remained stable at around 75% for the last four or five years and is currently at a similar level to 1971. The overall economic inactivity rate has remained relatively stable at around 21-22% over the last few years but the composition has changed. In 1971 male inactivity was 4.9%. By 2005 it had increased to 16.6%. Female inactivity has gone from 40.6% in 1971 to 26.4% by 2005. The reasons for economic inactivity have also changed, with a decline in the number looking after the family from over 36% to 29.5%. In 2005, 26.8% or 2.1m were inactive due to long term sickness. Amongst males long term sickness was main reason, accounting for 38% in total but 60% of those aged 35-49 and 52% of those aged 50-64. The inactivity rate of young people has increased because more are remaining in education although there has also been a rise amongst 16-17 year olds not in education, 28.1% of whom were economically inactive in 2005.

For some time the government has been attempting to increase the numbers in work, in part by manipulating the tax and benefit system to create ‘incentives' for the economically inactive to become active. One particular target has been the disabled where there has been a range of initiatives to get them into work: between 1998 and 2005 the number of people with a long term disability who are economically inactive, fell by four percentage points to 45.5%

Employment as a whole is becoming less secure, with the idea of a job for life an increasingly distant memory. The official figure for measuring the number leaving jobs, euphemistically called the job ‘separation' rate, is calculated by taking all of those who have lost a job in the last three months and dividing that number by the number of those who said they were in employment for more than three months, plus those who had separated from a paid job. This produces a figure that seems unrelated to the total actually in work. Thus, in 2004/5 the rate moved between just over 4% to 2.5%. In 2005 there were 30.8m jobs (of which 26.7m were employees) and 4.564m ‘separations', which means that 14.8% of all those in work or 17% of employed workers were ‘separated' from their jobs. This is a fairly high turnover rate, even accepting that some of these are individual choices to change jobs rather than just being made redundant (Labour Market Review 2006, ONS).

This is supported by a recent study of private firms, which found that between 1997 and 2005 job creation averaged 15.2% while job destruction averaged14.5%. This equated to 53,000 jobs being created each week and 51,000 destroyed. In services the rates were 16.4% and 14.8% respectively and in manufacturing 11% and 13.5%. (‘Job creation, job destruction and the role of small firms: firm-level evidence for the UK', Hijzen, Upward and Wright, 2007, GEP Centre, University of Nottingham). As well as illustrating the shift in employment from manufacturing to service industries these figures also suggest that on average workers can expect to change jobs about every 6 or 7 years. Once out of work finding another job is not straightforward for many. In 1998-9 43.9% of those made redundant found work within three months; in 2005-6 this had increased slightly to 46.7%. This still implies that over 50% remain unemployed for more than 3 months (Labour Market Review 2006, ONS).

Working hours and pay

The official figures also show a continued decline in the average number of hours worked. More than half of the workforce now work between 31 and 45 hours a week. The number working over 45 hours a week has dropped from 25.7% in 1995 to 20.9% in 2005. However this is not the whole picture. Amongst the self-employed, 34% work over 45 hours a week. The number of self-employed has grown in recent years to form 13% of the workforce. Most of this increase is in small businesses of just one or two people, suggesting that a proportion at least have been compelled to turn to this in the absence of other employment. Secondly, the current official figures are silent about the amount of overtime worked. A report from the Department of Trade and Industry in 2003 showed that there had been a significant increase in the amount of unpaid overtime worked: between 1988 and 1998: from 25.2% to 40.6% of males working fulltime and from 27% to 57% of females working fulltime (Working long hours: A review of the evidence Vol.1, DTI November 2003). The number working part time has also increased over recent years from 21% in 1984 to 26% in 2004. 44% of women and 11% of men work part time (Labour Market Review 2006, ONS). This may partly explain the reduction in the average number of hours worked.

In 2005/6 the average, or mean income was £443. However, half of the population lives on £362 or less per week. This later figure is the known as the median income and is the point that separates the population into two equal groups - half earn less and half earn more. This is an important measure because it is less affected by the income growth of the rich. Thus, while mean income grew by 2.3% during Labour's first term in office, median income grew by 2.0% during the same period. Since then both measures have slowed to 1.3% and 1.0% respectively (Poverty and Inequality in the UK 2007, Institute for Fiscal Studies). The August inflation report from the Bank of England states that growth in real income (the rate of increase of income less rises in prices and taxes) "was weak in 2007 Q1, continuing the trend seen in recent quarters". The report does not give exact figures but the accompanying chart suggests this may have declined to around 0.5% a year or less over the last three years and that at some points in 2006 it dipped below zero.

Debt

Debt, and personal debt in particular, is the motor that keeps the economy going. Despite all of the concern expressed it is essential for British capitalism that the working class keeps spending. This is why ever more risky loans continue to be given. The consequences of this have already been seen in the US with the turmoil flowing from the crisis in the sub-prime loan market. In Britain loans have been given based on ever greater multiples of annual earnings, leading to increasing difficulties in repayments, despite the fact that interest rates are less than half what they were during the last such crisis in the mid 1990s.

Personal debt has grown dramatically in Britain over the last decade reaching £1,355bn at the end of July, a rise of over 10% in one year (these figures and those that follow, unless otherwise specified, are taken from Credit Action "Debt facts and figures", September 2007). Household debt now stands at 160% of annual household income (Bank of England). In 1997 it was 105%. According to Credit Action, the current figure is the highest ever recorded and the highest in the developed world. It is made up of lending on homes, so-called ‘secured' lending, and consumer credit lending. The first is £1,140bn, having increased by 11% in a year and the other £214bn, having increased by 5.3%. Excluding mortgages average household debt is £8,856; including mortgages it is £56,000.

The results of this are wide ranging. 26,956 people went bankrupt or made an Individual Voluntary Arrangement in England and Wales in the second quarter of 2007, an increase of 4.2% on a year ago. 14,000 properties were repossessed in the first half of 2007, 30% more than the year before. In the first quarter of the year there were 247,187 consumer debt related county court judgements, the highest since 1997. 8.2m adults are in serious debt and 2.1m are struggling with repayments. Millions more miss payments on bills, are in arrears or have permanent overdrafts.

At the same time credit continues to be given out hand over fist with banks and building societies loaning some £1bn a day. Savings have continued to drop with only 46% saving regularly. 27% have no savings; 25% have less than £3,000.

Poverty

According to the official figures poverty has declined throughout the years of Labour government, until last year when the number went up by between 400 and 600 thousand. The standard measure of poverty is 60% of median income, which, using the 2005-6 figures, amounts to £217 a week. In 1996-7 14 million people, 25.3% of the population lived in poverty; in 2005-6 this was 12.7 million or 21.6 % (Poverty and Inequality in the UK 2007, Institute for Fiscal Studies).

The reduction in child poverty has been one of the government's most publicised aims with some 700,000 claimed to have been lifted out of poverty since Labour came to power. However, as we argued in WR 305, "not only does this mean that some 2.4 million, or 19% of children still live in poverty; it also only takes the situation back to where it was in the mid 1980s, which itself was above the level seen in the 1960s and 70s".

The impact of government policies to reduce poverty have been more marked amongst pensioners than any other group, with the number living in poverty reducing from 29.1% of pensioners to 17% since 1996/7 (this is based on income after housing costs, if measured before housing costs the figures are 24.6% and 20.8%, respectively). This still leaves 1.8m pensioners living in poverty. A recent study argues that this decline is unlikely to continue over the next decade and could reverse (IFS, 2007 Pensioner poverty over the next decade: what role for tax and benefit reform?). Looking further ahead, the reduction in the quality of pensions suggests that this rate will rise again as final salary pensions disappear and the relative value of the state pension declines from 16% of average earnings in 2005 to 6% in 2050 (OECD United Kingdom Economic Survey, 2005). Many workers will struggle to make up this shortfall with 9 million already judged to be making inadequate provision (ibid). A recent report shows that 54% of the FTSE 100 companies have closed their defined benefits scheme (this is another term for final salary pensions) to new employees and overall 81% of organisations have closed their schemes to new employees, the majority switching to the less-generous defined contribution scheme. The future continues to look uncertain, despite the fact that pension funds overall returned to credit last year after many years of deficit (Lane, Clark and Peacock, Accounting for pensions 2007). The number of people in final salary pension schemes has declined by 500,000 since 2004 to 27.5m (Credit Action). The real situation faced by older workers is revealed in the fact that every winter tens of thousands more older people die than at other times of the year. Although the number has fallen from the 1950s the decline since the early 1970s has been much slower with fairly frequent increases to over 40,000.

Outside these groups things have been worse "Poverty rates increased dramatically during the 1980s, more slowly in the early 1990s and then stabilised or fell from the mid 1990s. But the latest year of data puts an end to the eight-year decline in relative poverty: between 2004-05 and 2005-06 relative poverty rose by 1.1 percentage points (AHC) and 0.6 percentage points (BHC. Both of these increases are statistically significant..." (IFS). The poorer you were the worse things seem to be since the number of those in severe poverty - defined as less than 40% of median income - has increased, albeit only slightly, during this period. For those on benefits the picture is worse again with the ‘Jobseekers' allowance dropping from 39% of median income in 1996-97 to 31% by 2005-6 (AHC) (ibid).

Insecurity and stress

The consequence of all of this is to create a world of uncertainty and fear, leading to physical and mental health problems. Many people worry constantly about money; it is the major cause of stress reported to the Samaritans. The Citizens Advice service has seen 15% more people with debt problems than a year ago, dealing with 1.4 million problems in the past year. 89% of those with debts report worrying about them ‘most' or ‘all' of the time and a majority said their health had been affected with three in five saying they had received treatment, medication or counselling as a result (Credit Action and A Helping Hand, Legal Services Research Centre, ND).

All of the factors that have created this situation continue to develop: exploitation in work, poverty outside, stress and fear for the future everywhere. This is the reality of life under capitalism today. This is the future for us all so long as capitalism continues. This is the material situation that can cause individuals to despair but provokes the working class to resist attacks on it through its collective struggle, not just in Britain but all round the world. It is also stirring workers, particularly the younger generation, to question what sort of future capitalism has in store for humanity. When these two aspects of the class struggle, against the attacks and against the ideological justification for capitalism, go hand in hand then the situation is truly pregnant with danger for the ruling class and hope for humanity.

North, 6/9/07