The Labour Party is Losing the Centre

General Election, Political Science, United Kingdom

Graphideo.jpg

The graph above shows the level of electoral support for British political parties by ideological self-positioning, based on wave 10 of the British Electoral Study (data collected in November and December 2016). I have left out people who refuse to place themselves. The curve obviously declines as you go right for Labour, and increases for the Conservatives (with a decline on the far right as UKIP goes up). What is the most interesting is the slope of the two main parties: electoral support for Labour declines faster as you go right, and the Conservatives rise earlier, meaning that the Conservative are stronger on the center ground. The Conservatives do much better than Labour among people who consider themselves in the very middle of the political spectrum (that is, choose a 5 out of 10). 27% of voters in this category intend to vote Conservative, against only 18% who plan to vote for Labour. As the histogram below shows, this is the largest category of voters in the electorate, among those who are willing to place themselves (23% don’t). The sample is 30’319.

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Portuguese Labour Market Reforms in the Aftermath of the Eurozone Crisis: The Problems Behind the Recovery

Austerity, Eurozone Crisis, Portugal, Uncategorized, Welfare

This is a extended repost of a blog written with Jasper Simons for Critcom, the blog of the Council of European Studies.

If one were to believe the assessments of European institutions, Portugal is on the path to recover from the severe economic crisis it suffered from 2010 onwards, and the drastic reforms implemented in employment protection, unemployment benefits and collective bargaining are starting to yield results. Portugal swiftly implemented most of the measures contained in the Memorandum of Understanding (MoU) agreed with the Troika. Since then, exports have gone up, debt accumulation slowed down and unemployment decreased as well.

However labour market restructuring came with a high price tag, and the apparently promising numbers hide somewhat less encouraging developments for the long-term recovery of the country. The imposed changes to its political economy have not only led to a considerable deterioration of social protection, but they also coincided with high levels of emigration. The labour force has shrunk, and an impending demographic problem will be very difficult to reverse.

Portugal’s pre-crisis performance within the euro area, in contrast to Greece and Spain, was rather sluggish. In the aftermath of the financial crisis, José Sócrates’ socialist government (2005-June 2011) responded with a stimulus programme to push consumption and increase investment in the real economy. Active labour market and welfare policies improving access and levels of unemployment benefits were adopted in order to maintain demand and contain rising poverty. The coverage of unemployment insurance (the share of unemployed people actually receiving benefits) had steadily improved since 2000 (Figure 1

Figure1.pngSource: Pordata

With Portugal’s fiscal position worsening, the government quickly turned to spending cuts and deregulation reforms geared towards reassuring markets. These programmes could not prevent bankruptcy, however, and Portugal was forced to request a 79 billion euro bailout with even more severe austerity and flexibilisation policies attached. The MoU included, inter alia, the revision of the labour code and severe reductions in severance and overtime payments, measures increasing the scope for the individualisation of contracts and dismissals and lowering and restricting access to unemployment benefits, which the centre-right Passos Coelho government (June 2011-November 2015) implemented.

Firstly, employment protection and severance payments (of fixed-term contract workers) have been severely affected. Although Portugal still has relatively high protection levels in the European context (and had one of the highest levels in the run-up to the crisis), no other European country has witnessed such a strong liberalisation trajectory since the crisis (see Figure 2). Alongside the flexibilisation of dismissals, minimum severance payment requirements for employers were lowered. For instance, severance pay in case of a redundancy dismissal for a worker with five years of tenure dropped from 21.7 to 14.3 weeks between 2010 and 2013. The minimum wage was frozen at 485 euros/month from 2011 onwards (565 with Christmas bonuses), until the new left-wing coalition that came to power in 2016 increased it again.

Figure 2.jpegSource: OECD

Secondly, unemployment benefits were cut and eligibility requirements tightened reducing overall benefit. If unemployment did not decrease until recently, the share of people receiving benefits did decrease right when the government needed to cut expenditure. Coverage for both social and the ordinary unemployment benefits decreased: if high unemployment levels in Southern Europe often make the headlines, it is seldom mentioned that the actual number of unemployed people who receive benefits is much lower, and Southern Europe has had a rather poor record in this respect. Interestingly, if unemployment levels have decreased, this may have as much to do with the shrinking of the labour force as with the creation of jobs: between 2008 and 2014, the labour force (people in employment or seeking work) has shrunk by 303.000 people. If the number of jobs remains stable but the labor force decreases, unemployment goes down. This partly results from discouragement of workers, but also to a large extent from emigration. In fact, emigration may have had a greater impact because, as the government admitted, the number might be twice as high as official figures display. The Portuguese population has been shrinking since the crisis, and emigration added to an impending demographic problem, with the lowest fertility rates in the EU (1.23 children per woman) (Figure 3).

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Source: Pordata

Thirdly, collective bargaining has been decentralised in favour of firm level and individual agreements. Reforms of, erga omnes, extension have led to sweepingly decreasing coverage levels for ordinary workers (see figure 6). Remarkably, both the socialist and centre-right governments largely implemented these policies with the support, albeit lukewarm, of the social partners. Although the larger communist CGTP-IN remained absent, the socialist UGT worked together with employer organisations and both governments on many of the reforms including most of the MoU. This came, however, at the cost of internal division, loss of membership and various general strikes of both the CGTP-IN and the UGT.       Figure4.png            Source: UGT

Alexandre Afonso is an Assistant Professor at the University of Leiden, Netherlands. Jasper Simons is a political economy graduate and former European Economic and Social Committee trainee.

 

 

Will the Labour party turn into a losing machine under Corbyn?

United Kingdom

Jeremy Corbyn is currently the frontrunner for the leadership of the British Labour Party. While few would have bet on him when he announced his bid, he is now the bookies’ favourite.

Labour leadership candidates by Google searches, May-August 2015

Google searches for Labour leadership candidates, May-August 2015 (Google trends)

A number of prominent figure on the right of the party have come forward to warn against the electoral consequences of him becoming leader. Tony Blair wrote that Labour would face “annihilation” if the left-winger were to lead the party, and Gordon Brown explained at great length how a Corbyn leadership would affect the party’s credibility. The general theory among pundits is that only a centrist candidate can be able to win elections in Britain. There are three reasons behind this. The first is institutional: in a majoritarian system, you win elections in the centre, and you need to convince the voter in the middle of the voter distribution. The second and third are historical: Tony Blair managed to win three consecutive elections on a centrist (or centre-right) platform; and Michael Foot faced a mortifying defeat in 1983 with a clear left-wing platform. But how does the electoral score relate to the left-right position of parties?

In the Graph 2 below (click for interactive version), I have plotted the vote share of the Labour and Conservative parties between 1945 and 2010 against their left-right position as measured by the comparative manifesto project. In other posts I have used the Chapel Hill Expert Survey, but the manifesto data goes back much further in time. Regression is faced with a number of problems: endogeneity (it is difficult to know whether the ideological position determines success, or whether electoral success in previous elections conditions the electoral position), measurement problems (the British party system has become more multipartisan over the last 30 years, so vote shares have declined for both parties). The correlation is very weak, and the relationship is not significant. The regression line (you can see it if you click on the graph) slopes downwards for both parties, but it has probably more to do with the fact that both parties were more left-wing in the 1950s, and also gathered more votes, than being more left-wing yielding more votes.

Left-right position and vote share of British Political Parties, 1945-2010

However, the representation of the data gives an interesting representation of the history of British politics since 1945. In the postwar period, both major parties were on the left according to the data. That’s the period in which the NHS was created and major industries were nationalised. Throughout the 1950s and 1960s, the difference between the two parties was not that big (Graph 3). This changed to a great extent in the 1970s, when the distance between Labour and Tories increased and a major period of polarisation started. The Thatcher era is of course the most symptomatic of this: the Tories veered to the right, while Labour engaged in soul-searching with large swings up and down (Graph 3). The Blair leadership shifted the party to the right, bringing back electoral success. The distance between the two main parties decreased again, but this time, convergence took place on the right rather than on the left, as in the 1950s and 1960s.

In graph 2, it is striking to see two parallel lines going right and upwards: the Tories between 1974 and 1979 (Thatcher) and Labour between 1992 and 1997 (Blair). In both cases, a major shift to the right coincided with a major increase in vote share (following crushing defeats). In contrast, the two instances where the Labour party veered to the left (in 1974 and 1983) coincided with lower vote shares. A move to the left did coincide with a higher vote share between 1987 and 1992, but this was not enough to secure a majority in parliament.

Left-right position of Conservative and Labour party, 1945-2010 (Comparative Manifesto Data)

Left-right position of Labour and Conservative parties, 1945-2010

How Strong Are British Trade Unions, Really?

Corporatism, Trade Unions, United Kingdom

In Wednesday’s Prime Minister’s Questions, David Cameron presented Unite’s Leader Len McCluskey as the real master of the Labour party. Len McCluskey is the alien creature about to take over the country with his horde of commies, the new Goldstein. But how powerful are British unions, really?

One can think of two ways to measure union strength: their representation within the workforce (union density), and their participation in public policymaking (how routinely they are involved in day-to-day decision-making). Jelle Visser’s database at the university of Amsterdam has data on these two things since 1960.

British union are weak compared to similar countries. Union density is higher than in France and Germany but way below Sweden.However, the real weakness of British unions is the lack of any significant institutional involvement in decision-making processes. This influence has been totally curtailed since Margaret Thatcher and hasn’t been restored under New labour: the lack of a bar does not represent missing data but a zero as decade average. When it comes to what we call concertation, (or the institutionalised participation of unions in policymaking), union influence in the UK is much weaker than anywhere else in Europe.

Now, this may be explained in part by the strong ties the trade unions have with the Labour party: when party-union ties are strong, it may be more rational for unions to lobby Labour rather than engage in direct negotiations with the government and/or employers like in other countries (there is a good paper comparing Denmark and Sweden about this here). However, it deprives them from any influence when Labour is not in power. Arguably, if Labour cuts its links with the unions, it may become more important for unions to institutionalize regular channels of influence within government, such as the tripartite bodies one finds in Continental Europe or at EU level. However, the window of opportunity for this seems to be long gone. Shameless plug: I discuss these issues here.

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Union density, 1960-2010. Source: ICTWSS database, University of Amsterdam: http://www.uva-aias.net/208

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Involvement of trade unions in decision-making, decade averages. 2 = full concertation, regular and frequent involvement. 1 = partial concertation, irregular and infrequent involvement. 0 = non concertation, involement is rare or absent. Source: ICTWSS, University of Amsterdam: http://www.uva-aias.net/208.

I have met Pre-distribution. It Wears Clogs, Eats Chocolate, and Works Part-Time.

Welfare

Predistribution” is Labour’s new policy buzzword. It’s been all over the news. Policy Network has events and publications about it, the BBC talks about it, Ed Milliband talks about it, David Cameron ridicules it. Predistribution is supposed to be the new silver bullet for the centre-left, the agenda that will both create social justice and appeal to voters. But how would it work in the real world?

The traditional tool advocated by the left to ensure more equality has been re-distribution. Basically, you let the market do its thing, tax it, and use cash transfers to redistribute the revenues to the poor. The problem with redistribution is that it can never fully compensate for the externalities that the market creates. Moreover, it is increasingly difficult to sell politically, especially in countries like the United Kingdom. In the UK, the middle class doesn’t really have an interest in redistribution because most social schemes are means-tested, and benefits are mainly targeted at the poor only. If you lose your job, you’ll be entitled to Jobseekers’ allowance (56£ or 71£ a week) independently of your previous income. In fact, the drop between unemployment benefits and middle class incomes is so big that the middle class cannot really count on the welfare state as a safety net. They pay for it but don’t get much in return, which tends to create a hostile attitude towards it despite its residual features. As a result, even left-wing politicians are not so keen on it. For instance, Ed Milliband recently said that he would stick to the welfare cap introduced by the coalition. This is what Swedish sociologists Korpi and Palme called the paradox of redistribution: the more you target benefits at the poor to reduce inequalities, the less you actually reduce them.

Pre-distribution, by contrast, seeks to reduce inequalities within the market, in order to lower the need for redistribution. Because “mopping up” after the market through taxes and transfers is subject to political backlash, you need to get the market to distribute wealth more equally in the first place. The policies needed to make pre-distribution possible, however, are not very clear. Hacker emphasises “getting the macro-economy right”, ensuring “quality public services”, and “discovering a new set of countervailing powers in the market”. As far as one can tell, pre-distribution is a project whose policies still need to be invented. But does it exist in the real world?

Pre-transfer, pre-tax income inequality, 1979-2005

Source: Kenworthy 2009 (http://bit.ly/10u3JXU)

According to data from the Luxemburg Income Study, there are two countries where pre-tax, pre-transfer market inequalities have either decreased or stayed at particularly low levels between 1979 and 2005: the Netherlands and Switzerland (Figure 1). By contrast to Scandinavian countries, which rely quite heavily on taxes and transfers to fight poverty, the Netherlands and – especially – Switzerland do not rely that much on redistribution. In fact, due to strong regressive elements in its transfer and tax system, Switzerland hardly redistributes at all, on par with the US, and its market outcomes are fairly equal in the first place.

In a forthcoming chapter co-authored with Jelle Visser, we outline the mix of policies that have allowed these two countries to achieve low levels of inequality without the high taxes and transfers found in Scandinavia. In a nutshell, the recipe is a combination of high female employment underpinned by access to part-time work, and welfare and skill production regimes which lift incomes in the bottom half. They are good examples of what Kenworthy calls the high-employment road to low inequality, a variant of predistribution.

First, you need high employment rates. The rise of inequality in the West has been underpinned by an increase in the number of high-earners with two incomes, and an increase in the number of low-earners with only one income, or no income at all. These, in turn, need cash transfers. If you reduce the number of households with no or only one income by boosting the employment rate, then you reduce market inequalities. The main tool used to do this in the Netherlands and Switzerland has been part-time employment. These two countries have the two highest proportions of part-time employment in the OECD, and among the highest  female employment rates. These two things go hand-in-hand: since they don’t have the publicly subsidized childcare facilities available in Scandinavian countries, part-time employment has been the main channel for women to access employment. For this, however, you need childcare which makes work pay. If their wages are lower than the cost of childcare, it makes little sense for one of the parents to work.

Second, you need institutions which lift up incomes in the bottom tier of the labour market. This can be done either with earnings-related unemployment insurance which provides for higher reservation wages, a greater role for collective bargaining, or – probably more importantly – greater collective investment in occupational skills. What underpins income inequalities in the UK is the prevalence of a low-skill, low-wage, low-productivity service sector caused by 30 years of de-regulation. There has been a massive expansion of higher education, but skills at the bottom have lagged behind. In the construction sector, for instance, a large part of the workforce is outsourced, formally self-employed to bypass social security contributions, and craftsmen have to be sourced from abroad because companies don’t provide training. In countries like Switzerland or the Netherlands, by contrast, vocational training and apprenticeship systems ensure a higher level of skills at the bottom end of the labour market, and therefore higher wages. Vocational training also provides for particularly low levels of youth unemployment. In the UK, low means-tested benefits lead jobseekers to accept any job as fast as possible, even at lower wages. In continental Europe, earnings-related benefits give more leeway to select better jobs, ensure a better allocation of workers, and prevent wages below the living wage.

These measures do not involve an actual redistribution of wealth, but rather ensure a more equal distribution of it within the market. Because low wages in the UK eventually cost massive amounts of public money through tax credits, better skills at the bottom and easier channels for women’s employment could also be implemented in a context of austerity. Of course, the Dutch and Swiss social models should not be idealized. Dutch households now have the highest mortgage debt in Europe. Austerity policies have now partly undermined some of the policies (e.g. childcare) that had allowed for the employment boom of the 1990s and 2000s. Swiss employment success relies partly on very high levels of immigration which have planted the seeds for the strongest radical right party in Europe. But since the high tax/high transfer policies of Scandinavian countries seem difficult to implement elsewhere, some of their “predistribution” policies may be a more realistic path to follow.