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Working into poverty?

Written by Lucia Pradella.

Unemployment has reached unprecedented heights in Western Europe — wages are declining and attacks on organized labour are intensifying. Nearly a quarter of Western Europe’s population, about 92 million people, was at risk of poverty and social exclusion in 2013. That’s nearly 8.5 million more people than before the crisis. The number of working poor — employed workers in households with an annual income below the poverty threshold — is growing, and austerity is going to make things much worse in the future.

Critics of austerity argue that it is absurd and counterproductive, but European leaders disagree. During the latest round of negotiations with Greece Angela Merkel argued: “This is not about several billion Euros—this is fundamentally about how the EU can stay competitive in the world.” There is some truth in this. What Merkel does not mention is that workers in Europe, in Europe’s South in particular, increasingly compete with workers in the Global South.

Responding to falling profitability, the revival of the EU integration process beginning in the mid-1980s and the EU eastward enlargement in the 2000s contributed to the internationalization of west European capital. Another major push came from China’s opening to the world market and joining the WTO in 2000.

The introduction of the euro not only prevented southern member states from using competitive devaluation to support their exports; it also lowered transaction costs and eliminated exchange rate uncertainties, accelerating capital flows to the new member states in Central and Eastern Europe and, increasingly, towards Asia.

At the same time, restrictive and racist immigration policies did not seek to stop the increasing immigration to “Fortress Europe,” but produced illegality and a differential system of rights aimed at stratifying and dividing the working class.

The eastward reorganization of European industry, German in particular, spurred a redirection of production activities and trade from the southern periphery towards the eastern one. Capital-intensive production and services became progressively concentrated in Europe’s north, while southern member states went through a process of production downgrading.

Many scholars interpret the resulting macro-economic imbalances as signalling a lack of competitiveness of south European economies vis-à-vis the northern ones. This argument, however, limits its gaze to within Europe, and overlooks that what a country produces and exports matters. The point is that, because of their productive structures, southern member states like Greece, Portugal, Spain, and, partially, Italy increasingly compete with developing countries, not with northern Europe.

This helps explain the acute but uneven consequences of the economic crisis on sectors and countries in Western Europe (the EU-15). The EU manufacturing sector is one of the most badly affected, with 4.5 million jobs lost between 2008 and 2012 (corresponding to 12 per cent of manufacturing employment). But deindustrialization levels vary greatly among and within countries.

12115994_967381229948797_3750735593950350283_nSince 2011, moreover, the EU has increased its surveillance of the fiscal policies of its member states and has started intervening directly in new policy areas, such as wage setting. This interventionism is directly linked to the imposition of austerity and structural reforms.

These structural and policy factors undergird the unprecedented differentials in unemployment and real wages trends in the EU-15 since the outbreak of the crisis. In September 2015 unemployment ranged from 4.5 per cent in Germany to 5.3 in Britain, 11.8 in Italy and 25 in Greece. Between 2010 and 2014 average real wages increased by 4.4 per cent in Germany, while declining by 2.3 in Italy, 4.1 in Britain and 23.6 per cent in Greece.

Italy’s industrial output has declined by 25 per cent since 2008, and its industrial capacity by 13 per cent. In this context, EU interventions in 2011 further eroded collective bargaining and supported the implementation of workfare policies. In Britain, crisis and austerity have put an end to the long-term capacity of the public sector to compensate for job losses in the private sector, where new jobs have concentrated in involuntary part-time, temporary, and self- employment.

In Germany, the more favourable evolution of employment and real wages is mainly the result of its manufacturing industry’s international specialisation in high-value-added products. But even in Germany wages are expanding at a rate well below that of productivity, and temporary and low paid employment is increasing.

In-work poverty in Germany nearly doubled between 2005 and 2013 from 4.8 to 8.6 per cent. In the UK, in-work poverty levels are higher, but more stable. This picture mainly depends on the fact that poverty rates are calculated relative to median disposable income, which is declining thus pushing down the poverty threshold. In the UK rates of severe material deprivation among employed persons increased by 250 per cent between 2007 and 2013 (from 1.9 to 4.8 per cent); in Italy they doubled from 4.3 to 8.6 per cent, while in-work poverty levels reached 11 per cent — they are higher than the EU-15 average and increasing despite a falling poverty threshold.

This unitary but uneven process of impoverishment is accompanied by a clear trend towards longer working hours for full-time employees. In Germany these have returned to the pre-crisis level of just under 41h/w, while Britain is witnessing a return of the “long hours culture” — while nearly one in five employees works for low wages, one fifth of full-time employees regularly works more than 45h/w. In Italy the percentage of full-time employees working more than 45h/w (16.3 per cent in 2011) almost doubled since 2002.

The struggle for the reduction of the working day at the same pay is essential for tackling the roots of this process of impoverishment, and for building working class solidarity. In order to realize this demand, the labour movement needs to reject the logic of national competitiveness, and address head-on its own stratifications and divisions. This requires understanding that the condition of workers in Western Europe is directly linked to that of workers and popular classes in Eastern Europe and the Global South. Opposing European imperialism is essential for strengthening working class resistance in Western Europe itself. And so is the fight against harshening state racism and Islamophobia, and for the abrogation of the racist legislations that facilitate the super-exploitation of immigrant workers.

All these demands can realise the potential of increasingly “multinational” working classes, unifying the labour movement within and across national spaces.

Lucia Pradella is a Lecturer in International Political Economy at Kings College London and spoke at CSSGJ on October 26th 2015. Image credit: CSSGJ

Published inInternational Political EconomySocial Justice

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