LABOUR CONFERENCE 2013
Speech by Deputy Leader and Minister for Social Protection Joan Burton
At the “Ireland Unbound” Workshop
Saturday, 30th November 2013
Introduction
Fellow delegates,
It is just 1,000 days since Labour Party members endorsed our participation in government with Fine Gael.
We did so in order that the Labour Party would be central to the recovery of our economy.
We did so to transform our public services.
We did so to ensure our country could never again be so badly misgoverned that its very existence as an independent nation was in grave doubt.
Today, I can tell you that the Labour Party has played that central role with determination, resolve and without deserting the political values that bind us:
- We have focused relentlessly on tacking unemployment through our Pathways to Work strategy, with a significant recovery now under way in the jobs market. 58,000 new jobs have been created in the past year, the majority of them full-time. This is the fastest pace of jobs growth since 2007.
- We have overseen a programme of reform unprecedented in the history of the Department of Social Protection, moving from the passive benefits provider of old to a public employment service that is actively assisting people back to work, training or education.
- And despite the Troika’s requirement for reductions in spending, we have preserved the threshold of decency and the social welfare safety net that reduces the at-risk-of-poverty rate by 62 per cent.
New Challenges
As the era of the bailout ends, we face a new chapter in our country’s history.
We must face it without any of the illusions of the past, fully cognisant of the constraints of our membership of the Eurozone and ready to build an economy and society that can prosper amidst the challenges and opportunities of this age of globalisation.
And living without illusions should point us in particular to one inescapable conclusion: workers and families face unprecedented threats to their living standards and we as social democrats have yet to offer them a reliable remedy.
For decades, the proceeds of growth were shared between workers and employers as wages grew alongside productivity.
That was the bargain that we social democrats made with the market.
But long before the great recession and the financial crisis, that bargain had started to break down in many countries.
The wages of lower and middle-income people have stagnated while profits have skyrocketed.
And as living standards have declined, families have had to run ever faster just to stand still.
There are deep structural reasons for wage stagnation: fewer manufacturing jobs, globalisation and falling union membership.
As a recent Financial Times article stated: “There has been a battle between capital and labour and basically capital has won.”
But that victory will be hollow, because workers with insufficient wages to make ends meet are certainly not going to have the spending power that will enable economies to grow.
The conservative consensus is that low labour costs are the key to growth and job creation.
I reject this.
In fact, low wages have contributed to the rise of the debt-led consumption of the past 30 years, which in large part contributed to the financial crisis.
Wages are not just costs, but in an economy like ours, they are also the main source of demand.
So as the economy begins to recover and more jobs are created, we need to ensure that wages don’t stagnate.
A recovery that didn’t improve the living standards of ordinary families would be no recovery at all.
That is why I have argued strongly for a Living Wage and the enactment of collective bargaining legislation.
The Way Forward
But we must go further than this.
If you think about it for a moment, you will realise that we live in an unprecedented era.
We are now over six years into the financial crisis, albeit that it has stabilised.
But that doesn’t mean we have returned to anything you would call normality.
Paul Krugman and others have recently suggested that we are in an era of “secular stagnation” – that is, despite zero interest rates and vast amounts of money in circulation from central banks, growth and employment creation remain below potential.
The answer is not, as some have suggested, the return to asset price bubbles and debt-fuelled consumption.
As International Labour Organisation researchers have recently concluded, growth in the global economy – and in particular the Eurozone – is in aggregate wage-led.
In other words wages, which are generally spent, are better for growth than corporate profits, which are not.
Wage-led growth is therefore the most viable and effective strategy for economic recovery and growth in the Eurozone and at a global level.
It is a strategy the Labour Party and our colleagues in the trade union movement should put centre stage in the weeks and months ahead.
And addressing wages cannot be done in a way that benefits all parties – workers, unions and employers – without re-creating formal structures for discussion, engagement and agreement that have not been in place for a number of years.
It is in no one’s interests that wage pressures are allowed to build up uncontrolled in different sectors ad regions with the attendant consequences for competitiveness, industrial peace and economic recovery.
This does not mean a return to the discredited social partnership gravy train of the Bertie era.
Instead, we need to build a system of social dialogue that is suitable for the very new challenges of the 21st century.
Thank you very much.