Millions of jobs cuts and huge loss of pay – how the main capitalist economies are using the pandemic

Hours worked per person in the working-age population (aged 15 to 64), world, 2005–20. Note: Annual average Source: ILO

By Mark Buckley

All across the globe there has been a huge loss of pay and wages during the pandemic. According to the International Labour Organisation (ILO), by the end of last year 114 million workers had lost their jobs, while another 140 million had their hours reduced. At the same time the ILO estimates that workers lost $3.7 trillion in pay in 2020, which is approximately equivalent to the size of the German economy, far larger than any of the other Western European economies including Britain (pdf).

The assault on workers’ pay and conditions is concentrated in the largest capitalist economies. The ILO estimates that American workers were the biggest losers, with a fall of 10.3% in their incomes, but that the ‘high-income’ countries as a group saw the biggest decline in workers’ incomes (pay and benefits).

This fact alone is highly revealing. The relatively sharp decline in wages in the richer capitalist economies is clearly not related to lack of resources, as other countries naturally have fewer, some far fewer resources. Instead, it reflects a two-pronged offensive against the working class and the oppressed which combines the worst death tolls in the world along with the most fierce attack on pay, working conditions, and benefits, all of which is underpinned by the increase in unemployment. As Marx pointed out in Capital, one of the unique features of capitalism is the conscious maintenance of a ‘reserve army of labour’ of the unemployed, which itself can be threatened or used to contain and even depress wages and working conditions.

The ILO estimates that there will be a further 3% loss in working hours globally in 2021, with again the Americas and Europe leading the way, with losses of 5.9% and 5.7% respectively, almost double the global average. Numerically, women have borne the brunt of the offensive, and 5% of women globally have been forced into unemployment or into ‘economic inactivity’, that is, forced out of the workforce altogether. Proportionally in the analysis, youth have been hardest hit, with 8.7% forced into inactivity. 

The ILO report does not provide data on the experience of ethnic minorities. But we know from individual countries such as the US and Britain that they have been even harder hit. In the US, the unemployment rate for Black workers soared from 5.2% before the pandemic to 16.7% in mid-2020. In Britain the likelihood of Black and Asian people being made unemployed is 26 times greater than their white co-workers.

By design, not by accident

The rise in unemployment, the attack on pay and conditions and hugely unequal burden borne by women, Black and Asian people and youth represent a qualitative sharpening of the ruling class offensive that began in the 1980s. 

The latest policies are not an aberration, mysteriously afflicting all the major capitalist powers simultaneously. They are a deepening of previous attacks, and should be very familiar to all those who observed these countries’ response to the 2008 financial crisis.

But the imperative to launch this offensive is even greater now. One of the key contradictions of the post-2008 recession was that it was characterised by a refusal of the private sector to invest. This in turn meant that even a snail’s pace growth meant businesses were forced to hire and in general unemployment rates eventually fell. It is extremely difficult to force wages lower under those circumstances (although Britain managed it for a period in real terms through a falling currency and rising prices). 

The crisis of profitability in the major Western economies which led to the 2008 crisis has not been overcome as a result. This global pandemic with 2.4 million dead is an opportunity to enforce a decisive reduction in pay and conditions as well as other measures, with the aim of driving profits higher.

These same countries are also providing the largest bail-outs in history to the private sector, US stock markets continue to soar, and practices such as ‘fire and rehire’ on worse terms are given no discouragement. In addition, in countries where large parts of industry remain in public hands, such as France and Germany, right-wing governments hope to boost private profits through privatisations.

In France, Macron is trying to implement reactionary labour laws as well as privatisations of state-owned assets, although there has been strong resistance. In Germany the economics minister Peter Altmaier, Merkel’s former chief of staff, has proposed that the government sell some of its investments, which have grown considerably in value over the past decade. Among these assets are a 21 per cent stake in Deutsche Post and 32 per cent of Deutsche Telekom.

In countries such as Britain and the US, where there are far fewer state assets to privatise, the boost to the private sector now comes primarily in the form of outsourcing or through straightforward subsidies. In the US there have now been two ‘fiscal stimulus’ packages and other measures which have amounted to at least $4.5 trillion, and the overwhelming bulk of this has been direct transfers to business. In Britain, outsourcing of almost every aspect of the pandemic response has become the norm, at huge cost and with shambolic results.

Of course, these giveaways completely belie any notion that resources are scarce to deal with the economic effects of the pandemic. When the UK Chancellor tried to push through a reduction in furlough payments to two-thirds of regular pay rather than 80%, this was not because ‘there is no magic money tree’. The government had already allocated £360 billion in direct subsidies before trying to reduce wages even further.

Instead, the purpose is to accustom workers and workers’ organisations to much lower pay and only a tactical retreat was in order. The same applies to the bonfire of regulations supporting workers’ rights that remains under discussion.

But the British circumstances are just a specific combination of trends in almost all the main capitalist economies. An all-sided class offensive is being mounted, under the cloak of the pandemic. Grasping the importance of this assault is the first step to resisting it.