Policy-makers should aim to raise the share of wages in the economy as a key part of efforts to escape from the global economic recession, says a new pamphlet from the Trades Union Congress. It says there is growing evidence that increased wage inequality helped to cause the global crash in the first place, as well as hindering recovery subsequently. It provides estimates of the impact of a range of ‘pre-distribution’ type measures from raising the wage floor to reducing unemployment.

Key recommendations

• The share of wages in the economy should be increased from its existing level of 55 per cent to 60 per cent, which is where it was in 1980 and during much of the 1950s and 1960s.
• In the longer term this will require a restructuring of the economy to produce higher-skilled jobs: but in the short term a mix of policies could close one-quarter of this wage gap more quickly.
• There should be a 'modest' increase in the national minimum wage, to restore its 2009 level in real terms (increasing it from £6.19 to £6.60 per hour).
• New structures should be brought in to create higher minimum wages in sectors that can afford them, set through new tripartite structures and collective bargaining.
• The spread of the 'living wage' should be encouraged though measures such as living wage zones.
• Collective bargaining should be extended to help narrow the gap between the top and bottom of company pay scales.
• Full employment policies should be pursued, to increase demand for labour.

Source: Stewart Lansley and Howard Reed, How to Boost the Wage Share, Trades Union Congress
Links: Pamphlet | TUC press release | TUC blog post | Left Foot Forward blog post | Guardian report