Financial Crisis and Wage Policy: Interview with Pierre Laliberté

Press release | 09 May 2011

ACTRAV INFO: ACTRAV has just held a seminar on wages, the crisis and the recovery. What’s your assessment of this meeting, which took place on 6 May?

Pierre Laliberté: The seminar provided the opportunity for a very informative exchange of views between researchers, trade unionists and ILO colleagues on the role of wages. On the one hand, participants highlighted the downward trend in earned incomes within the economy over the past 30 years and the growth in inequality, and on the other hand their role in the birth of the financial crisis in 2007. It was also a chance to examine wage-based recovery strategies. All in all, given the drop in wages, two exit strategies were developed to drive growth: exports (China, German, Japan) and indebtedness (US, UK, Spain). These strategies were mutually supportive. Following the crisis, these complementary strategies are clearly no longer possible. The more indebted countries will experience the relative stagnation of their domestic economies, so forcing the countries with trade surpluses to develop other markets. But where? The answer is for the countries in surplus to develop their domestic markets, in order to boost not only domestic demand but also imports from abroad. The main way chosen to achieve this should be to increase wages in the surplus countries, in line with productivity gains (or even more if wages have been lagging substantially behind). The delinking of wages from productivity gains was one of the most important consequences of globalization. So for the trade union movement, correcting this state of affairs is a priority. But in fact, what we’re seeing now is a revival of unhealthy competition among countries – a tug of war in which each tries to increase market share by pushing wages down and/or manipulating the exchange rate of its currency. Obviously, a “neo-mercantilist” strategy won’t work at the global level. In an economic context where the emphasis is being placed on depressing wages, it’s crucial for the trade union movement to tackle this strategy head-on. But it’s also important for governments not only to facilitate the exercise of collective bargaining but also to be proactive, notably as regards minimum wages and the fight against preacarious work.

ACTRAV INFO: Could a revision of pay policies at the enterprise level help to promote a recovery, after the financial crisis of 2008?

Pierre Laliberté: It most certainly could, but there are few signs of such a revision so far. The good news is that in certain so-called emergent countries, workers are indeed managing to secure better rates of pay. But this is still not enough. We’re still patiently awaiting similar developments in countries with strong trade union movements – such as Germany, for instance. Without getting too “personal”, it’s obvious that the trade union movement has to start thinking about ways of coordinating at the regional level. That doesn’t mean that everyone has to table the same demands, but those demands should be coherent with each other and should not encourage downward competition on wages. The same thing could be envisaged for the minimum wage, with multinational standards setting a floor so that people can earn a decent living – and, once again, as a way of preventing a leveling down. The Asian Wage Floor initiative is interesting in this respect, as are the discussions around the setting of a minimum wage in Europe.

ACTRAV INFO: in the present context, marked as it is by crises at the national level, what steps do you advocate to protect workers’ rights, and particularly their wages?

Pierre Laliberté: For States facing major budget constraints, economic reflation via wages could indeed provide an alternative strategy, complementing other measures such as the strengthening of the social safety net. Such a strategy is perfectly compatible with raising industrial productivity, which in turn is the precondition for improvements in living standards. But in reality, this kind of strategy will, rather predictably, run into opposition from the employers. Above all, it runs counter to the dominant economic logic, which sees wage growth as a direct threat to inflation control and the competitiveness of national economies. States have to break out of that logic and adopt concerted strategies to grow domestic demand while managing exchange rates in order to prevent destructive competition. Here too, the unions have got some persuading to do, as regards both public opinion and governments.

ACTRAV INFO: Has another meeting been scheduled soon to continue the reflections on this issue?

Pierre Laliberté: The presentations made at this meeting will appear in the next issue of the International Journal of Labour Research. Quite clearly, this reflection must continue, in order to gain a better understanding of the consequences of a wage-led recovery, but also of the strategies to be pursued in order to achieve it.

For more information, contact: Pierre LALIBERTÉ
Specialist in Workers’ Activities
Tel.: +41 22 799 75 95
E-mail: laliberte[at]ilo[dot]org