Newsletter No. 26
JANUARY 2005
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Do ‘moderate’ demands by labour create jobs and investment? Recent Finnish research shows what happens to corporate sector profits when workers practise wage discipline and constraint. The research shows, in summary, that “wage discipline is reflected primarily in growth of dividends, not in a growth in investment that would improve employment”. Finnish corporations paid out 64 billion euros in dividends between 1994-2003 and invested 21 billion euros in machinery, equipment and plant. In contrast, they paid out 7 billion euros in dividends in the 1980s, while investing over 50 billion euros in Finland. Employers do not spruik this story when they demand as small as possible wage increases, supposedly so they can invest and create new jobs. Operating profits and turnover in Finland grew ‘at an astounding rate’ in the 1990s and dividends clearly outstripped corporate tax payments. Yet public sector spending was seen as unaffordable and slashed, while the Finnish corporate sector ‘streamlined’ by shedding 50,000 staff from 1996, even though real wage levels stagnated in that time. Corporations invested most of their after-tax revenue in group companies or on acquisitions, including privatised ex-public sector enterprises, rather than on creating anything new. More than 60 per cent of this spending was outside Finland, as the companies aimed to conquer new markets (see http://www.helsinginsanomat.fi/english/article/1076153931251) From the point of view of business shorter work hours without reducing pay is only another way of getting a wage rise. Workers are seen only as a cost, from which most value must be extracted; and human needs are ignored as far as possible. If workers have the power to take a wage rise, we also have the power to extract reduced hours and reorganise our work lives, so our work fits in with our other life needs. In this era of enhanced productivity, super profits and slow (full-time) jobs growth, we should make both demands equally. |