The centre-left must reinvent itself again by raising the stalled living standards of ordinary workers—and look beyond economics to shape a new social patriotismby Gavin Kelly / September 13, 2010 / Leave a comment
Whoever wins the Labour leadership will need to decide what a 21st-century social democracy looks like. The contest has, so far, shed little light on it. Shaped by the need to appeal to the party’s electoral college, it has been dominated by tactical admissions about policy mistakes and, perhaps inevitably given the scale of the spending cuts, a retreat to the comfortable terrain of opposition politics.
How should the argument be advanced? Historically, social democracy has succeeded when it has achieved two things: first, when it has raised the living standards of the broad mass of the population; and second, when it has complemented this “materialism” with a national popular project, embedded in the cultural aspirations and attachments of the British people. Today, neither of these components is in place.
The first and overriding task is the economy. During the election, Labour leaders were clear they didn’t want to return to business as usual, but were less sure about what to propose instead. A post-crisis agenda on financial regulation and tackling Britain’s bubble economy—with its nexus of housing wealth, personal debt and easy credit—is necessary but not sufficient. The bigger question is what to do about the stagnant living standards of those on low and middle incomes.
For many experts, such as the OECD, questioning the overall performance of our labour market is counter-intuitive. Over the past decade, Britain has been praised for pioneering a strategy based on labour market flexibility, a modest though rising minimum wage, tax credits and employer-driven skills policy. Compared to most other countries, it has indeed been a success: Britain’s employment rate, which for the quarter ending June 2010 was 70.5 per cent (7.8 per cent unemployment and 23.4 per cent inactivity rate), remains relatively high and the jobs market has performed far better in this recession than other recent downturns.
But looked at from the stance of a person on a modest income, things feel less rosy. Although between 1997-2009 living standards rose by 2 per cent a year on average, the Institute for Fiscal Studies notes that this rise consisted of a booming 3 per cent in Labour’s first term, and then a steep fall-off. Since 2002-03, median income growth has not surpassed 1.1 per cent.
In the US, this phenomena of the “squeezed middle class” is well established. Real incomes of the majority of the country’s population have been stagnant for a…