Climate needs lower wages with higher benefits | Brussels Blog

Climate needs lower wages with higher benefits

posted by on 10th Oct 2021

De-growth from the top down 1.

This series of notes, “De-growth from the top down”, is for UK Government and UK Local Authorities hoping that one or more of them will discard the usual policy greenwash (also known as “Blah, blah, blah”) and create lifestyles that are pleasant and live within planetary budgets.

To avoid devastating climate change a fall in consumption, will be necessary: Technology is not advancing fast enough to dissociate consumption from the pollution by greenhouse gases. A fall in consumption is de-growth, the opposite of the economic growth beloved of most economists.

The rich and affluent consume the most, so cause most climate changing pollution. Their lifestyles must see the greatest changes.

Reducing inequality is subsidiary aim, but an equal world that has been devastated by climate change is not “a consummation devoutly to be wished”.

This first note is about jobs – green jobs. It challenges what is becoming conventional wisdom: That we should aim for a high wage, high productivity economy to be achieved by education and training “ensuring all citizens have the skills they need to operate in the 21st century”.

High productivity with full employment creates increasing production (aka economic growth). This ignores climate change, which, for the foreseeable future, requires a reduction in production and consumption.

Wages and growth

A simplified view of the economy …

  1. The many rely on wages for most of their income. The few also have significant income from assets they own.
  2. As more stuff is produced and consumed, more labour is required, causing wages to rise for the many – along with the rewards to the asset-holding few.

Growth in production (aka “economic growth”) means we must consume more stuff.  As individuals, most of us want to consume more – like good meals out, posh cars or trips to see the wildlife of Africa.  The stuff we consume needs producing – and producing the stuff pays the wages of the many, like waiters and cooks, car workers, and airline staff.

Economic growth is a way of creating jobs and increasing the wages of the many. It also increases the unearned income of the few from their assets.

Green growth or degrowth

The urgent climate situation has arisen because producing the stuff we consume creates large amounts of greenhouse gas emissions. One way to reduce emissions is to reduce consumption and production.  This is not politically attractive, so we try to reduce the emissions from production by technological advances. Then, it is hoped, the economy can still grow, without destroying the climate. This is “green growth”, which “is a term to describe a path of economic growth that is environmentally sustainable”

Unfortunately, the rate of reduction of emissions is not fast enough to avoid climate disaster. Emissions must become zero or negative quickly. The emissions scenarios proposed by scientists, which keep to the limits of the Paris Agreement demand negative emissions – the extraction of greenhouse gases from the atmosphere.

Emissions must be cut quickly so that total emissions, from now on, fit within a budget, known as the remaining carbon budget: Exceeding this budget will cause dangerous climate change. Based on estimates from the IPCC, this budget is less than 40 tonnes of CO2e per person in the world. The UK’s current emissions are about 10 tonnes CO2e per person per year – the UK’s share of the remaining budget runs out in four years.

Achieving “green growth” for the whole UK economy is  not possible: It is not “green” just to increase the production of products that cause lower emissions, total emissions must fit with the remaining budgets. For example, the UK policy of switching to electric cars might mean that emissions fall and production increases, but as electric cars cause very large emissions (particularly in their manufacture) which make it impossible for the policy to be called “green”.  They may have emissions somewhat less than cars powered by fossil fuels, but their emissions are still great enough to trash the climate.

For the global economy the news isn’t good either. Greenhouse gas emissions are reducing for each unit of production, but the rate of reduction is not fast enough to keep within the remaining budget  –  unless production (and therefore consumption) is reduced. Global Green Growth (if this means an increase in consumption keeping within remaining carbon budgets) is a fantasy.

To save the climate, the world must consume less. That means producing less. That means less jobs or less productive jobs.  If you believe that high levels of employment are good for society that means on average jobs must be less productive.  In a market economy that means lower wages.

So, saving the climate needs more jobs with lower wages – or large-scale unemployment

Unearned income and employment

Wages are not the only form of income, but most believe that, with some deserving exceptions, wages should be the major source of income. The belief is widespread that  most people should contribute to society and work for a living. Something similar is in King James’ Bible, which says “He who does not work, neither shall he eat”.

This (falsely) leads to the belief that workers (and their families) should be able to live on their wages alone – without the need for “subsidies that come from the taxpayer”. This belief increases inequality and leads to climate disaster.

Accepting that “most people should contribute to society and work for a living”, does not mean that they should be without unearned income: The rent paid on the shop opposite, which contributes to my small pension from the Universities Superannuation Scheme, is unearned income. For the few, the owners of assets, such as property or shares, unearned income has a more direct route, straight into their bank accounts.

These asset owners have benefited hugely in recent decades. (See Fraser Nelson’s article in the Spectator, “Assetocracy: the inversion of the welfare state”.) These forms of unearned income can have an indirect effect on wage levels, but it is not as obvious as the effect on wages by the benefit system.

Benefits paid to the less well off are unearned income. Universal credit is the prime example.  It is paid from government revenues, not from privately owned assets. It is a payment to help with living costs. It is payable to people on a low wage, out of work or cannot work. Universal credit acts as a labour subsidy, allowing poorer people to have lower wages but still work with their standard of living marginally supported.

Benefits and the minimum wage

A common objection to benefit payments that allow people to work for less is this: Benefits are subsidies, which benefit employers allowing them to dodge their responsibility of providing a decent living for their workers. This is sloppy soft-left thinking.

While employers can be exploitative and bad people in general, they are subject to market forces. If workers become cheaper to employ through subsidies, businesses will make more profits by creating jobs. But for the workers, an increase in demand for their labour will increase wages.

Setting a minimum wage has a different effect. It raises the cost of labour and depresses employment – unless it has the effect of growing the economy. An article in the left-leaning American Progress, by Lily Roberts and Ben Olinsky explains this thinking.  The title summarises their argument: “Raising the Minimum Wage Would Boost an Economic Recovery—and Reduce Taxpayer Subsidization of Low-Wage Work”.

However, to “boost economic recovery” is to increase production, which will cause more greenhouse gas emissions and lead to climate disaster. To avoid this disaster, and have a decent level of employment, it will be necessary to have more jobs that produce less. This means lower wages.

For those of us that are more than “left-leaning” and also care about the climate this will mean an increase in the “subsidisation of low-paid work”. It also means  increased taxes, particularly on those that are destroying life as we know it with their polluting lifestyles.

Next: Taxing the polluters.

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