Wage Relativities and the Postwar Persistence of Low Pay

In 1957, Roger Bowlby published one of the first systematic attempts to explain the TUC’s opposition to the introduction of a statutory national minimum wage in the United Kingdom. After pointing out that the establishment of a “legal minimum wage for each industry or occupation” had been part of the TUC’s standing rules since 1924, he remarked that the postwar union movement had done little to make its introduction possible. ^{Footnote 10} The TUC General Council had never raised the issue with the government, and various resolutions calling on the Council to do so had been soundly defeated at the yearly meetings of Congress. Referring to the debate over one such resolution, brought forward in 1948, Bowlby described the main objections given by union opponents of a national minimum wage. The most important among them were that it would “interfere with the[ir] historic function” by shifting the scene of negotiations “from the shop to Parliament.” He also mentioned their fear that the minimum wage “would tend in practice to become the maximum.” Finally, Bowlby emphasized the importance of the TUC’s growing dissatisfaction with the functioning of the Wages Councils system. As it became clear that these councils proved largely ineffective in remedying low pay and acted as an obstacle to the development of collective bargaining, he argued, labor union views on statutory intervention had “gradually evolved.” ^{Footnote 11}

After observing that a substantial minority of TUC affiliates had nevertheless remained in favor of the introduction of a statutory national minimum wage throughout the postwar period, Bowlby also briefly considered whether the “differing attitudes” of TUC members reflected “a fundamental split within the British trade union movement” on the minimum-wage issue or the low pay problem in general. He eventually concluded that this was not the case. Of much importance to this was probably that Bowlby, like most of his contemporaries, assumed that the problem of low pay was foremost an outcome of underpayment and other “sweating” practices by callous employers. ^{Footnote 12} The relationship between low pay and the relatively unequal wage structure in the United Kingdom, especially among manual workers, received much less attention in scholarly circles at the time. To some extent, this may have been an outcome of the tendency to emphasize the importance of distributive class conflict. At the same time, however, it is important to note that during much of the 1950s, there was a widespread belief in the United Kingdom that the earnings of lower-paid workers had continued to rise at a faster rate than those of other workers—just as they had done during most of the previous decade. ^{Footnote 13}

During much of the 1940s, wage differentials had indeed decreased sharply in the United Kingdom. This decline had been particularly severe during the first half of the 1940s, when flat-rate increases were often preferred over percentage gains. ^{Footnote 14} Contrary to popular belief at the time, this compression had not been supported by the craft unions in an attempt to expand downward and recruit semiskilled workers. ^{Footnote 15} Instead, their acquiescence rested on strong assurances from the TUC General Council that these settlements were merely temporary in nature. ^{Footnote 16} Despite these assurances, the reduction in the skill differential had led to “strong tensions” in various industries. ^{Footnote 17} After the war, craft union leaders therefore immediately made it clear that they would seek to restore prewar wage patterns in future years. As a result of the serious economic situation in which the United Kingdom found itself at the time, the postwar Attlee government at first managed to obtain TUC support for a voluntary wage-restraint policy, which temporary froze the existing wage distribution. Yet by the late 1940s, the General Council had to admit that it proved impossible to obtain further support for wage restraint as many of its craft union affiliates were seeking to restore wage relativities. ^{Footnote 18} From then on, manual wage differentials consistently increased, reaching prewar levels by the turn of the following decade. ^{Footnote 19}

The sustained decline in the share of total labor market earnings held by workers in the lowest decile of the manual wage distribution naturally had strong consequences for their purchasing power. It meant, as Labour policians would later come to emphasize, that the lowest paid were “left behind,” and benefited little from the general rise in living standards in the postwar period. ^{Footnote 20} By the middle of the 1950s, left-leaning intellectuals such as Barbara Wootton had come to recognize this. ^{Footnote 21} Yet it was not until the turn of the decade, or even the early 1960s, that this elicited a response from either of the two main political parties. By then, various studies had confirmed that, in contrast to most continental European countries, inequalities between different skill groups had been on the rise in the United Kingdom since the 1950s. ^{Footnote 22} In addition, studies by Peter Townsend and others had shattered the previously widely shared view that economic progress and the expansion of the welfare state were turning poverty into a thing of the past. ^{Footnote 23} The resulting “rediscovery of poverty” was not only accompanied by a renewed interest in the problem of poverty in employment or simply “low pay,” but there was also a growing realization that this problem could to a large extent be attributed to the highly unequal wage structure in the United Kingdom.

This realization was not without its consequences. By the early 1960s, Labour prominents such as Michael Stewart had become increasingly critical of the persistence of inequalities for which there was “no good economic reason,” and which resulted from a system that allowed wage increases “to be determined by the sheer strength of bargaining power.” ^{Footnote 24} As a result, both the Labour Party and the Conservative government had come to consider statutory and other measures that could address some of the shortcomings of the voluntary bargaining system. One such measure, both parties believed, might be the introduction of a statutory national minimum wage. Shortly before the 1964 parliamentary elections, the Conservative Douglas-Home government even established a working party on this. The purpose of this party was merely to explore the possible consequences of the introduction of a national minimum wage, and the Conservative government does not seem to have been committed to statutory intervention in any way. ^{Footnote 25} Yet when the 1964 elections resulted in a Labour victory, a new government came to power that was far more willing to consider statutory intervention to improve matters for the lowest paid.

Labour’s First Minimum-Wage Proposal

Given the strong and vocal defense of the wage differential by its occupationally organized affiliates, it is not hard to see why the first serious thinking on the introduction of a statutory national minimum came from the Labour Party—and not from the TUC General Council. In fact, until the Labour government put the issue on the agenda in the mid-1960s, the problem of low pay in general does not seem to have been of major concern to the council. For instance, the topic was rarely raised in its dealings with government, its written submissions to Congress, and in the debates that followed. Nor was there a separate workgroup for it. ^{Footnote 26} The General Council did continue to support those Wages Councils that were already in existence, but for the rest it continued to adhere to the principle that the problem of low pay had to be solved by strengthening the voluntary bargaining system. That the persistence of low pay could not only be attributed to sweating practices, but were to a large extent also an outcome of the highly unequal wage distribution in the United Kingdom, was something the council apparently was not yet willing or able to admit.

Labour officials were, by contrast, quite willing to do so. They consequently understood that any solution to the low-pay problem, including the introduction of a statutory national minimum wage, depended crucially on whether wage differentials could be compressed in the long term. After all, and as pointed out by the working party that had been appointed by the government’s Conservative predecessor, “profit margins of employers can only be squeezed so far” before they had to “pass costs on to consumers.” ^{Footnote 27} While acknowledging that a national minimum wage might prove a more effective and comprehensive form of wage protection for the lowest paid than the present system of Wages Councils, both because it would cover all workers and because it would be more easily enforceable, the working party also pointed out that statutory intervention would only prove effective if unions representing skilled (and thus higher paid) workers would refrain from seeking to restore lost differentials. ^{Footnote 28} If this were impossible, then the only result would be to “cause inflation by starting a wage round that would raise the whole earnings structure.” ^{Footnote 29}

The new Labour government fully agreed with this assessment. It too feared that the response of unions representing higher-paid workers might turn the introduction of a statutory minimum wage into “an expensive method of eliminating pockets of underpayment” that could “lead to a jacking up of the whole wages structure.” ^{Footnote 30} As a result, it first came to explore other means of improving matters for Britain’s lowest-paid workers. The most important of these was the introduction of a new voluntary incomes policy that was to serve the twofold aim of providing greater “equity between groups in different situations” while at the same time making sure that wage and price increases were kept in check. ^{Footnote 31} To achieve these aims, the government intended to negotiate national-level ceilings with the TUC that contained loopholes for productivity increases and allowed higher-than-average wage increases for the lowest paid. ^{Footnote 32} To further improve matters for the lowest paid, the government also increased family allowances, improved housing subsidies, and introduced government-subsidized school meals. The working party that had been charged with investigating the implications of the introduction of a statutory national minimum wage apparently did not even finish its work. ^{Footnote 33}

It took only about two years before the government realized the shortcomings of its approach. Despite the issuance of a Joint Statement of Intent on Productivity, Prices and Incomes in early 1965, negotiations with the TUC over the application of its incomes policy proved cumbersome from the start. The policy to allow national set norms to be exceeded in case of significant increases in productivity provided labor unions with a useful loophole to evade government-negotiated limits on wage growth and to maintain wage differentials. ^{Footnote 34} As a result, the policy was undermined by substantial wage drift, and in most industries the position of disenfranchised groups continued to worsen. ^{Footnote 35} Specific measures on housing and family allowances did prove successful in improving matters for the lowest paid. Yet, and as acknowledged by Labour officials in 1967, the limits of what was possible through these measures were soon reached. ^{Footnote 36} In the beginning of that year, and perhaps partly emboldened by a recent electoral victory in which it managed to increase its parliamentary majority substantially, the government therefore changed course and appointed a new interdepartmental working party that was to prepare the ground for the possible introduction of a statutory national minimum wage.

At the same time, the cabinet made it clear that it did not want a firm commitment on the issue because of possible “adverse effects.” ^{Footnote 37} How large these effects would be, Labour officials emphasized, depended foremost on the response of the union movement. According to the interdepartmental working party, the introduction of a statutory national minimum wage would raise the wage bill by at least 3 percent; if differentials were partially (but not completely) restored, the increase in wage costs would more likely be close to 11 percent. ^{Footnote 38} The members of the working party themselves believed that the higher estimate was most realistic as “trade unions in Great Britain had generally shown no willingness to accept a narrowing of differentials even where this had come about as a result of settlements aimed at helping lower paid workers. There was no reason for believing that unions would be any less keen on maintaining their differentials in the future.” ^{Footnote 39} Officials from the Department of Employment and Productivity added that the distribution of earnings among manual workers, which likely represented the most important group of workers to whom a national minimum wage might apply, had been the most stable. For this reason, they shared the Treasury’s concerns that the introduction of a statutory minimum might well prove unworkable in the United Kingdom. ^{Footnote 40}

These and other concerns were also put forward by the TUC General Council when it was consulted about the government’s intentions in the beginning of 1968. Its misgivings largely echoed those of its main affiliates, which mostly were lukewarm or responded with outright opposition to the government’s proposal. ^{Footnote 41} Among the opponents were various general and industrial unions that represented large numbers of low-paid workers such as the National Union of Agricultural Workers (NUAW), the National Union of Mineworkers (NUM), and the Transport and General Workers’ Union (TGWU). At first sight, this can be taken as evidence that the union movement’s largely dismissive response mainly resulted from fears that statutory intervention would undermine its function and thus its ability to attract workers—as various studies have argued over the years. ^{Footnote 42} Some of these studies have also pointed to union dissatisfaction with the government’s incomes policy and attempts to reduce industrial disputes during the late 1960s, arguing that this further reinforced the movement’s commitment to voluntarism in this period. Under these circumstances, it is often argued, it was “not difficult to see why the TUC came out so strongly against a statutory NMW. . . . The relationship with the Labour Government deteriorated sharply towards the end of the 1960’s with the publication of In Place of Strife and Productivity, Prices, and Incomes Policy. This, together with a long tradition of ‘voluntarism,’ meant it was extremely unlikely that any increase in government involvement in the wage-determination process would be accepted.” ^{Footnote 43}

To some extent, these considerations may indeed have played a role. There can be no doubt that there was increasing resentment within the union movement against the government’s attempts to impose wage restraint during the late 1960s, and initiatives such as In Place of Strife certainly made the latter more wary of government attempts to impose legal constraints on industrial action. ^{Footnote 44} Yet did this also preclude union support for broader measures that resulted in increased government interference with the wage-bargaining process, such as the introduction of a statutory national minimum wage? Even at the time, not all analysts believed that this was the case. The main problem with this explanation, as one left-wing critic of the labor union movement pointed out at the time, is that “one can oppose anti-working class laws, and still demand the eight-hour day.” ^{Footnote 45} The actions of the TUC illustrated that this was indeed quite possible. Despite its deteriorating relationship with the government, the TUC in fact continued to support various initiatives that threatened to undermine traditional union functions in this period. These included new health and safety legislation as well as various social insurance initiatives such as the 1966 National Insurance Act, which granted earnings-related supplements to state unemployment and sickness benefits. ^{Footnote 46} In addition, it supported the introduction of the 1970 Equal Pay Act, which aimed to address the unequal treatment of female workers, a group among which the problem of poverty in low pay was particularly severe at the time. ^{Footnote 47}

This later provoked Labour officials into complaining that it was “inconsistent to support health and safety legislation, the equal pay act, etc., but not legislation on a minimum wage.” ^{Footnote 48} As this remark was made to put pressure on the TUC, these officials were smart enough to refrain from mentioning that there was one crucial difference between these proposals: whereas Labour’s health and safety legislation, the 1966 National Insurance Act, and the 1970 Equal Pay Act did not affect existing wage differentials between different occupational groups, ^{Footnote 49} Labour’s statutory national minimum-wage proposal did threaten to do so. In fact, and as we will see, the TUC and its main affiliates realized quite well that its introduction would only be successful if it would result in wage compression between more- and less-skilled workers. This gave those unions that mainly represented skilled workers a powerful incentive to oppose Labour’s minimum-wage proposal. Some years ago, they had similarly resisted the introduction of the 1965 Redundancy Payments Act, which was considered to be far more redistributive than the 1966 National Insurance Act. ^{Footnote 50} In addition, the union movement had provided rather lukewarm support for Labour’s second attempt to introduce superannuation during the late 1960s. The TUC General Council did support the proposal in public but at the same time tried to push for a less redistributive contributory formula and more lenient opt-out conditions for workers who already had access to private pension funds. Despite Labour’s willingness to partially give in to these demands, unions representing workers who stood to lose from superannuation’s redistributive features continued to fight the proposal tooth and nail. Their motives were aptly captured by Perry Coldwick, the representative of the Transport and Salaried Staffs’ Association (TSSA), who explained his opposition to the proposal by pointing out that it threatened to “improve the position of the worse-off section of the community at the expense of those whose earnings were in the middle salary range.” ^{Footnote 51} In other words, there is good reason to believe that the response of individual labor unions to statutory intervention was to a large extent guided by the material consequences of this for their members. There generally was strong opposition to statutory intervention that threatened to affect existing skill differentials. Yet despite its deteriorating relationship with the government, the union movement continued to support various other major government initiatives, even when these initiatives threatened to undermine traditional union functions and even their ability to attract new workers. Of course, one could argue that the introduction of health and safety legislation or the Equal Pay Act did less to undermine traditional union functions than Labour’s statutory minimum-wage proposal, which after all meant to shift the scene of negotiations over basic wages for a substantial group of workers from the shop to Parliament. Yet a careful reading of events does not provide evidence for the view that this concern was of overriding importance to either the TUC General Council or those of its affiliates that represented this group of workers. On the contrary, it suggests that the problem of wage differentials was of far greater importance to them.

Internal deliberations within the General Council and between the council and its main affiliates were certainly not characterized by major concerns over the possible consequences of statutory intervention for the functioning and strength of the labor union movement. In fact, when the General Council consulted its members on the matter, none of the opponents of statutory intervention even mentioned this concern. ^{Footnote 52} It is therefore quite possible that they were much less fearful that the introduction of a statutory national minimum wage would undermine their function and future ability to attract workers than is often suggested. TUC officials, on their part, doubted whether this would even be the case. The newly created Low Pay Working Party, for instance, argued that, provided it were to take place in steps, the introduction of a statutory minimum wage would most likely be seen as an outcome of labor union efforts. ^{Footnote 53} In addition, the working party pointed out that it was to a large extent a moot point whether its introduction might affect collective bargaining in the future. After all, it argued, the problem of low pay was “not confined to a few industries but [was] widely distributed,” with over half of all low-paid workers located in relatively prosperous and well-organized industries. ^{Footnote 54} As a result, collective bargaining had done little to improve matters for the lowest paid in the United Kingdom. ^{Footnote 55}

In other words, by the late 1960s, TUC officials and their affiliates realized quite well that the persistence of low pay was inextricably bound to the rigid maintenance of the wage differential, in particular by the craft unions. Unions representing many low-paid workers such as the NUAW, NUM, and TGWU therefore expressed strong doubts as to whether the introduction of a statutory national minimum wage could be effective. ^{Footnote 56} TUC officials likewise feared that the union movement would buy a “pig in the poke” by granting the state a larger role in the wage-fixing process without obtaining an assurance that this would indeed improve matters for Britain’s lowest-paid workers. ^{Footnote 57} An internal note neatly summarized the problem by pointing out that “simply raising basic rates may raise the wages of all workers by a proportionate amount; this general effect will limit the amount that can be allocated to the lower paid in the sense that there is an overall limit on what firms can afford to pay without raising prices. If they do raise prices, this will have a disproportionally adverse effect on the real incomes of the lowest paid workers in the economy in general.” ^{Footnote 58} Under these circumstances, the introduction of a statutory national minimum wage would not only be “costly,” but it would also have little effect because “differentials would be rigidly maintained and . . . prices increased to an extent that would wipe out the effects of the initial increase in low payment incomes.” ^{Footnote 59}

That this scenario was indeed a likely one was made clear by the response of the TUC’s craft and occupationally organized white-collar affiliates to the statutory minimum-wage proposal. Whereas unions such as the NUAW and NUM had merely expressed doubts as to whether statutory intervention could be effective, unions such as the powerful Iron and Steel Confederation (ISTC) and the National Association of Local Government Officers (NALGO) bluntly stated that “wage negotiations was a field in which statutory interference could not be tolerated.” ^{Footnote 60} As unions that represented workers with a strong position on the labor market, they certainly did not fear that the minimum wage would undermine their ability to attract future members or that it would be set at too low a level. Instead, they feared for its effect on the wage differential. The ISTC made this abundantly clear when it argued that the government’s initiative would “retard the progress . . . of those workers whose earnings were above the statutory minimum.” ^{Footnote 61} This, it warned, would not be accepted by its members. To support its claim, the union mentioned that when steel employers had some years ago suggested to concentrate wage increases on the low paid, their members had strongly opposed this. White-collar unions such as the Civil and Public Services Association (CPSA) even went so far as to state that their membership was “unwilling to sacrifice . . . any contraction of incremental scales in order to help those at the lower levels, essentially because many of those at the top felt low paid themselves.” ^{Footnote 62}

To bolster their opposition to the government’s proposal, unions such as the ISTC were not beyond threatening that they would seek to restore any reductions in differentials that their members might experience. ^{Footnote 63} In the face of so much resistance, the Labour government decided to back down, at least until after the upcoming election of June 1970. ^{Footnote 64} When it then lost this election to the Conservatives, the proposal was shelved indefinitely. To the new Conservative government, it was obvious that a statutory national minimum wage could not work “without so disturbing wage differentials and undermining managerial control.” Its policy was therefore to “maintain a reasonable pattern of differentials” that would “secure the acquiescence of unions representing the higher paid and also the support of employers.” ^{Footnote 65} The new government did promise to enact social legislation to deal with the problem of low pay. Most important among these was the introduction of the Family Incomes Supplement, which granted a means-tested supplement to the poorest families. ^{Footnote 66} For the most part, though, the Conservatives regarded the problem of low pay as a collective-bargaining issue, which consequently had to be dealt with in dealings between unions and employers.

Following Labour’s electoral defeat in June 1970, the TUC General Council felt free to inform its members that it remained committed to the “normal process of collective bargaining to improve the position of the lower paid on an industry by industry basis.” ^{Footnote 67} Faced with strong pressure from those of its members who represented many low-paid workers, it could not completely ignore Labour’s initiative. While opposing statutory intervention, it therefore agreed to set unilateral declarations on what it deemed to be adequate minimum-wage levels in various industries. ^{Footnote 68} It did so even though internal reports were quite clear about the limitations of such a voluntary approach. A report written by the Low Pay Working Party aptly described these limitations, arguing that even if a unilateral declaration would result in “some employers paying more, it would hardly result in any trade unions asking for less.” ^{Footnote 69} The initiative nevertheless evoked opposition from the craft-union movement. While the General Council expressed its hopes that a unilateral declaration could “embarrass” high-paid unions into supporting wage compression, they in turn warned that such a declaration might “alienate higher paid workers whose differentials appeared to be narrowing adversely, and stimulate horizontal trade union organization based on earnings levels.” ^{Footnote 70}

Low Pay and the Collapse of Centralized Bargaining

In subsequent years, the introduction of a statutory national minimum wage remained an official Labour Party goal. When the Party returned to power in February 1974, it nevertheless refrained from picking up on its minimum-wage proposal. Of major importance were once more the dismissive stance of the General Council and the strong opposition of many TUC affiliates toward statutory intervention. While acknowledging the severity of the low-pay problem, the General Council maintained the position that it could not support a legislative solution because “it does not yet have the support of the whole trade union movement.” ^{Footnote 71} It provided several reasons for this. One reason was that statutory intervention would be disastrous for collective bargaining among lower-paid workers—an argument that Labour officials dismissed as unsound since in the past “collective bargaining had done nothing for the low paid.” ^{Footnote 72} In addition, the council warned that statutory intervention might prove “inflationary” as differentials “tend to be re-established quickly.” ^{Footnote 73} Labour officials still regarded this objection as quite valid. In fact, current events were to make it clear to them that the problem of the occupational wage differential was more salient than ever.

The enduring commitment of, in particular, Britain’s craft unions to the defense of the occupational wage differential first became clear during discussions with the Confederation of British Industry (CBI) over the problem of low pay in the National Economic Development Council during the early 1970s. Here CBI representatives embarrassed their union counterparts by announcing that they viewed wage compression as an entirely discussable solution for the problem of low pay in the United Kingdom. After pointing out that they regarded this problem as mainly a redistributive issue between higher- and lower-paid workers, CBI representatives informed their TUC counterparts that “acceptance of a squeezing of differentials was vital” to improving matters for Britain’s lowest-paid workers. ^{Footnote 74} This stance naturally brought them into conflict with craft-union leaders, who responded by stating that “it was no good attempting to improve the lot of the low paid by a crude squeezing of the differentials approach.” These craft unionists emphasized the necessity to “recognize the differential in skill,” which made it important “not to eliminate all incentives.” ^{Footnote 75} This naturally provoked CBI representatives to ask how one was expected to improve matters for the low paid when wage differentials had to remain in check. They noted that “the important thing was the reaction on differentials following an increase of pay for the lowest paid. . . . This was a question of redistributing income through the voluntary collective bargaining system.” ^{Footnote 76} To support their position, CBI representatives offered to urge their members to grant only flat-rate increases in coming years. In response, TUC representatives to the NEDC offered to consider doing the same. ^{Footnote 77}

Privately, however, both parties must have realized the futility of obtaining broad labor union agreement. After all, many of the TUC affiliates, as we have seen, had made it abundantly clear that they opposed the introduction of a statutory national minimum wage mainly because of its possible effect on wage differentials. This made it quite likely that they would also oppose voluntary attempts to raise the relative wages of the lowest paid. In fact, privately the TUC had for very many years attempted to convince its craft-union members to accept a reduction in the wage differential, and its appeals had consistently fallen on deaf ears. ^{Footnote 78} TUC and CBI representatives were well aware what this meant for attempts to improve matters for the lowest paid, whether through statutory or voluntary means. For the CBI, this was one of many reasons why it opposed statutory intervention. ^{Footnote 79} But if some union or employers’ representatives needed to be reminded of this, then the events that took place in the second half of the 1970s worked to refresh their memory. In these years, a severe financial crisis once more brought a Labour government to push for the introduction of a durable incomes policy based on voluntary wage restraint. To limit the hardship imposed by this policy on the lowest paid, craft-union warnings that wage differentials had to be respected were temporarily neglected by the wider labor union movement. The result was, as labor union expert Robert Taylor described it, “a harsh internecine conflict within the working class itself,” which resulted in a series of competing wage claims that eventually produced the infamous “Winter of Discontent” in 1978. ^{Footnote 80}

The failure of Labour’s “social contract” with the labor union movement, and the various causes for this, have received so much scholarly attention over the years that there is no need to elaborate on this failure here. ^{Footnote 81} For the purposes of this article, it is enough to note that its failure effectively terminated the national debate over the low-pay problem. The reason for this is that the demise of the social contract served as a powerful reminder of the ability of the craft-union movement to defend the manual-wage differential. From the start, the social contract was plagued by substantial wage drift that mainly served to maintain occupational wage relativities. ^{Footnote 82} These illicit measures greatly reduced the compressing effects of the various centralized bargaining rounds of the mid-1970s. ^{Footnote 83} The wage explosions of the late 1970s further reversed any compression that had come about in this period. As a result, the division of labor-market earnings within the manual category—which still contained most of Britain’s lowest-paid workers—was in fact slightly more unequal by the end of the decade than it had been in the years before the social contract. ^{Footnote 84} To contemporaries, who viewed this lack of impact as “startling,” the consequences for government attempts to improve matters for the low paid was clear. ^{Footnote 85}

Conclusion: The Enduring Importance of Occupational Wage Relativities

The preceding analysis illustrated that Labour’s first statutory minimum-wage proposal emerged at a time when it was becoming increasingly clear that the postwar persistence of low pay was inextricably linked to the highly unequal wage distribution in the United Kingdom, especially among manual workers. It then outlined the dilemma that this created. One the one hand, it meant that neither the Wages Councils nor an extension of the collective bargaining machinery could make the problem of low pay disappear. On the other hand, it meant that the introduction of a national minimum wage could be effective only if wage differentials could be reduced in the long term. Both the response of the TUC’s occupationally organized union affiliates to the minimum-wage proposal, as well as their refusal to countenance wage settlements that raised the relative wages of the lowest paid, made it clear to all involved that the latter was quite unlikely. As a result, the Labour government, the TUC General Council, and even those of its affiliates that represented many low-paid workers all realized that its introduction would likely be ineffective while proving quite inflationary. To Labour, this realization was sufficient to refrain from pushing for the implementation of its proposal. To the latter, it meant that the benefits of statutory intervention simply did not outweigh its costs.

These costs, it should be emphasized, could also be defined in organizational terms. The findings put forward in this article thus by no means conflict with the view that organized labor’s response to the minimum-wage proposal was to some extent also guided by the fear that legislative intervention would weaken the functioning and strength of the union movement. But they do suggest that this concern was of much less importance than previous studies have suggested. The opposition of the TUC General Council and that of its occupationally organized affiliates certainly did not stem from this; nor, for that matter, did it reflect a principal rejection of all kinds of government involvement in the wage-bargaining process. Instead, their opposition mainly revolved around the occupational defense of the wage differential—and its consequences. To those unions that represented many lower-paid workers, the main fear was that they would buy a “pig in the poke” by granting the state a larger role in the wage-fixing process, while it was quite doubtful that this would indeed improve matters for their members. Had they instead been convinced that statutory intervention would be effective, they likely would have been far more supportive of Labour’s proposal.

This latter point can be further illuminated by looking at the events surrounding the TUC’s eventual acceptance of the minimum wage, which took place in the mid-1980s. For this reason, and because it illustrates the continuing commitment of the craft-union movement in particular to the defense of the occupational wage differential, I will conclude with some notes on this. It is hard to say why the TUC General Council and Congress eventually came to express their support for the introduction of a statutory national minimum wage. Existing explanations have focused on various factors, ranging from leadership changes in key unions to the continual erosion of the Wages Councils. ^{Footnote 86} Both of these explanations undoubtedly have merit. Yet given the hostility of Britain’s craft unions to the introduction of a minimum wage, another explanation, which focuses on their organizational decline, may also be considered. Representing nearly 25 percent of all organized workers in the immediate postwar period, the share of the total union membership held by the craft unions had started to decline strongly from the 1960s on. By the mid-1980s, this share had declined to little over 5 percent. ^{Footnote 87} The strong decline of the staunchest defendants of the wage differential and the most consistent opponents of the minimum wage surely must have facilitated its eventual acceptance by the TUC.

The latter explanation is supported by the fact that nearly all of Britain’s craft unions remained opposed to the introduction of a statutory national minimum wage in this period. There can be no doubt that they did so because they viewed it as “one of a redistributionist trend.” ^{Footnote 88} Those craft unions that did come to support its introduction, such as the Engineers’ and Mangers’ Association (EMA), did so on the condition that it would not affect existing wage differentials. The EMA and other craft unions therefore strongly argued against setting the statutory minimum wage at two-thirds of average earnings—as the Labour Party originally intended. ^{Footnote 89} By contrast, nearly all general and industrial union members supported its introduction. ^{Footnote 90} The only major general union that had its doubts was the TGWU. These doubts seems to have been at least partly the result of a genuine concern that statutory interference might undermine its ability to attract new workers. Yet crucially, this did not stop it from supporting its introduction in the end. ^{Footnote 91} Other unions that organized many low-paid workers, such as the NUR and the National Union of Public Employees (NUPE), specifically argued against the view that the introduction of a statutory national minimum wage would undermine their ability to attract new members. ^{Footnote 92}

According to Lewis Minkin, it took “some adroit work by the TUC staff to create a majority at the Congress” in favor of its introduction. Yet once this majority was achieved, its introduction remained an official TUC goal. The TUC’s craft-union affiliates had strongly resisted the course and made it clear that they would seek to reverse any resulting reductions in wage differentials that their members might experience. They would continue to do so in consecutive years. ^{Footnote 93} That this threat still proved instrumental in influencing events became clear when a new Labour government finally introduced the minimum wage in 1998. The new government’s decision to set its hourly rate well below the level promised by Labour when it was still in opposition, and its refusal to allow for an automatic yearly increase, drew much protest at the time. ^{Footnote 94} Yet given the rigid attachment of the craft unions to existing wage differentials, it could be argued that a higher rate may not have been feasible. According to David Metcalf, the change in policy resulted from concerns that a higher level would have “serious adverse economic effects,” which forced Labour to take account of “wider economic and social circumstances, such as employment levels and income distribution.” ^{Footnote 95}