The gradual destruction of the fair labour contract

In his book Buying Time, his astute analysis of the course of post-Second World War capitalism, the German political economist Wolfgang Streeck argues that at the end of the 1960s, business began to withdraw from the postwar social pact (Streeck, 2017) – the particular settlement between capital, labour and the state that had ushered in the welfare state and the trentes glorieuses, three decades of social stability and affluence for the many. We will tell this story more fully in the next chapter on good government. Streeck describes how the dissolution of the postwar settlement had enormous consequences for almost every aspect of the organisation of state, society and economy. One of its most prominent victims was the gradual destruction of the fair labour contract.

Over the last 50 years the share of the national income pie that went to labour has steadily decreased, while that of capital has increased. According to OECD figures, between 1975 and 2013 the share of labour in the national income declined from more than 65 per cent to 56 per cent (ILO and OECD, 2015). This simple figure masks massive, wrenching changes in the lives of workers. First, wages have stagnated. For example, in the United States, from 1979 to 2018, net productivity rose by 70 per cent, while the hourly pay of typical workers essentially stagnated – increasing only 12 per cent over 39 years (after adjusting for inflation). This means that productivity rose six times as much as wages in that period (EPI, 2019). The OECD shows a similar decoupling between productivity and wages across its 24 member states (although with considerable differences between states; Schwellnus et al, 2017).

Perhaps an even bigger change has been the gradual displacement of full-time, regularly paid and contractually formalised employment with ‘non-standard employment’. The latter is a euphemism for situations where workers have a lot of responsibility, risk, and stress, low pay, and few, if any, rights. Until roughly the start of the new millennium, in the rich world, the majority of those who worked for money did so in full-time non-temporary, work secured by employment contracts with more or less generous benefits, union recognition, job protection, worker consultation, and protected by sector-wide wage negotiations.