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Three steps towards a new, more equal world

30 January 2015

The case against inequality is not only moral but also economic, argues Frances O'Grady, and that should be a winning combination

I'VE just returned from the Davos World Economic Forum, which brings together politicians and the global elite. Almost everyone who has a private jet was there. While this has always been the one week of the year when company leaders like to show their social conscience, it is interesting to see how many see inequality as something that is holding back growth and even destabilising the economy.

Oxfam's finding that the richest one per cent own almost half the world's wealth recently caught the headlines but, according to the Equality Trust, the richest 100 families in the UK have seen their combined wealth increase by at least £15 billion since 2008. The UK's current richest 100 people have the same combined wealth as 30 per cent of UK households.

Recognising the problem is only the first step. There are no signs of trends being reversed. Top directors now earn 175 times the average worker's salary - up from 45 times in 1998. And one in five workers is paid below the living wage.

I was a member of Dr Sentamu's Living Wage Commission. He is right when he talks about "Making work pay" being an empty slogan for millions of people who cannot make ends meet. He is right to draw attention to those who are forced to work two or three jobs to put food on the table, while the UK taxpayer picks up the bill - in tax credits, in-work benefits, and decreased demand in the economy.

While it is good that the economy is growing again, millions have been locked out. Good jobs, destroyed in the crash or lost through spending cuts, have too often been replaced by dead-end jobs, zero-hours contracts and low-paid, bogus "self-employment". Too many - especially the young - are in jobs that do not use their skills and talents to the full. And I worry that, however long it takes growth to get the numbers back to where they were, we have not learned the real lessons of the crash, and are instead building a permanently unequal society.

This is not just about gaps in income and wealth, but in status and worth. There is a new divide between those who have good, fulfilling jobs with decent pay, and a growing group of the permanently precarious, left out and left behind.

This, as some of the more thoughtful business people I met in Davos now acknowledge, is not the basis for a cohesive and economically successful society. We should see the economic crash not as a blip, but as the spur to build a new, more equal society. At its heart must be stronger wage growth, particularly for those at the bottom. This would give businesses confident customers with some money in their pockets. Of course, no one can predict ex- actly how the economy will develop, but making reduced inequality as much an aim of economic policy as jobs, growth, and living standards sets the right objective.

We can easily identify some initial steps. First, bolder increases to the minimum wage, and an increased commitment to the living wage from employers, in both public and private sectors, so that their own staff, and those in their supply chains, have a decent standard of living. Employers in many sectors can afford to pay more without job losses. That is why we need to find new ways for employers and unions to work together, to set higher legal minimum wages, agreed at a sector level by modern wages councils.

Second, we must give workers a stronger voice by extending collective bargaining. Even the International Monetary Fund (hardly a trade union mouthpiece) says that collective bargaining can increase wages for ordinary people.

And, crucially, we need workers to sit on company boards and remuneration committees, to tackle the issue of soar-away executive pay. A real recovery would ensure that everyone got a fair share.

Now is exactly the right moment to combine the traditional moral arguments against excessive inequality with the new economic case for sharing wealth and income more fairly.

Together, they should make an irrefutable argument.

Frances O'Grady is the General Secretary of the TUC.

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