Trade Unions and the Cost of Living (1963)

From the February 1963 issue of the Socialist Standard

If workers were slaves or horses and consequently were fed and housed by their owners they would have grievous hardship to put up with but would not have to trouble about the cost to their owners of providing fodder and stables: that would be the owners’ worry.

The slaves’ troubles would centre round the fact that they were being worked to the limit for the benefit of the owners. As workers are not owned but are “free,” they have the same basic grievance as did the slaves, but in addition they have to worry about their wages and the cost of living and about keeping a job. So for a century or more the trade unions, and other bodies claiming to speak for the workers have, alongside the job of struggling with the employers over wages, occupied themselves with the statistical problems of measuring movements of wages and movements of prices.

It is hard to think of any activity into which so much effort has gone with so little result. From a working class standpoint it has been almost totally misconceived and misdirected, though, of course, the masses of information, the wage indexes and price indexes, have been useful to governments and employers.

In the trade unions it started with the optimistic belief that if employers would not give wage increases under threat or actuality of a strike they might do so if presented with information about the high or rising cost of living. It was soon found that the employers were not moved by this argument whereupon the social reformers came forward with their notion that in such circumstances the government would intervene from a sense of social obligation, and compel the employers to give way.

This did seem to produce some limited result in that the better organised employers supported government legislation to enforce minimum wages for workers in some of the worst paid trades (the “sweated” trades and agriculture, for example). But the employers and the government were not thereby committing themselves to the principle that all workers were to be guaranteed a job at a reasonable standard of living and safeguarded against the effects of rising prices.

The bigger employers were protecting themselves against the competition of low-priced goods produced by the “sweaters,” and they and the government both had a long-term interest, industrial and military, in preventing the creation of masses of underfed and physically sub-standard workers. For the employers as a whole and for the government the paramount interest has always been the necessity of making profit and keeping the profit-system functioning as smoothly as maybe: which means that their paramount interest has always been, not in pushing wages up but in preventing them from rising to the point that profit is endangered.

No government has ever abandoned this and the Conservative Selwyn Lloyd’s efforts to impose a “wage-pause” in the face of rising prices only echoed the wage-restraint policy of the post-war Labour government. What then is the use of quoting the official retail price index to show that prices are rising, against a Selwyn Lloyd or a Stafford Cripps, who both declared in their day that it was government policy to prevent wages from rising notwithstanding the rise of the cost of living?

Against this background of the real world of Capitalism, the world of profit seeking, exploitation and class struggle, the question of the statistical accuracy of the government’s retail price index can be seen in its proper perspective, but even in this narrow field trade union effort has been often based on misconception. A sixpenny pamphlet, The New Cost of Living Index, published by the Labour Research Department, may help to dispel some of the misunderstandings.

In the last half century hundreds of trade union conference resolutions have been passed demanding a more accurate index and specifically urging the government to make the index more accurate by including items of expenditure in it that were earlier excluded. Many of the resolutions rested on the fallacious belief that making the index cover more items (e.g., by bringing into it motor cars, TV sets, refrigerators, Terylene garments, dog and cat foods, etc., etc.) has the effect of raising the index figure. But the index is not a measure of total cost of a lot of articles but a measure of the average percentage price change month by month; bringing in more articles has no effect whatever on the index figure at the point when they are brought in. If, after being brought in, the new items rise in price, that will help to raise the index, but if they fall in price, that will lower the index.

If all prices always moved in the same direction and by the same percentage an index based on only one article would be just as accurate as one based on hundreds of separate articles. But as prices do not move together and an average has to be taken of all the separate movements, it is necessary for statistical accuracy that the right importance (“weight”) should be given to each item. In the original index of half a century ago foods were given a “weight” of 60 out of a 100. This meant that if food prices as a whole rose by 10 per cent, and all other prices remained unchanged the index would rise by 6 per cent. In the present index food is given a weight of only about 30 in a 100, so that if food now went up by 10 per cent, and other prices remained unchanged the index would go up by only about 3 per cent.

The L.R.D. pamphlet explains these technicalities in some detail and argues that some items are inaccurately weighted (alcoholic drinks, tobacco, and housing). It also recognises that though in the past few years this has operated mainly to make the index lower than it otherwise would be, it could operate the other way. The overweighting of tobacco, which for long helped to depress the index because tobacco prices rose comparatively little, more recently had the opposite effect because tobacco prices rose sharply. Which brings us to a defect in the approach of the pamphlet. It has a subtitle which asks, is the index “fair,” and maintains that accuracy is an important question to the workers. So far as the index as such has any effect in determining the level of wages, which is at most very little, the workers, of course, do not want it to be “fair” and accurate; they want it to be inaccurate in one direction only. Between the wars when as its critics pointed out the index heavily overweighted food, those workers, including civil servants, who had wage agreements related to the index had reason to be pleased, for as long as food prices were rising faster than other prices, because this made the index figure “inaccurately” high. They ceased to like it when food prices slumped and their pay went down with them.

There are, however, trivialities by comparison with the real issues facing the working class: their need to use trade union organisation as far as it can be used, to push up wages regardless of cost of living index figures, and beyond this, the task of replacing Capitalism by Socialism which will involve the ending of wages and prices, and the cost of living index.

Edgar Hardcastle