Everyone who works for a living, whether in the public or private sector, has an interest in maintaining a strong ‘social wage,’ says Yves Engler.

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If you work for a living, you’re better off when welfare payments are high.

Sound strange? Only because the truth is often ignored in a society where the narrow interests of wealth-holders dominate over all else.

Recently, the Conservative government curtailed Employment Insurance benefits by changing the definition of suitable employment and reasonable job search to include ever wider classifications and geographical distances. In its 2012 budget the Ontario government froze welfare payments (at $599 a month for a single person) and cut $100 a year from the child benefit supplement. The leader of Ontario’s Progressive Conservatives, Tim Hudak, has proposed more drastic cuts, including steadily reducing payments to able-bodied welfare recipients, in a 22-page policy paper.

“We want to reinforce in Ontario the dignity of a job,” Hudak told reporters in presenting his party’s planned social assistance reforms three weeks ago.

These attacks against the poor and unemployed should be opposed by anyone who cares about their fellow human beings. But in addition to compassion, working people have another important reason to oppose these cuts to social benefits: a self-interest in maintaining the social wage.

Right-wing pundits often claim that welfare payments or unemployment benefits cost us all. And at one level it is true that welfare benefits cost everyone, though rarely are these costs a significant chunk of public expenditure.

Examined from another perspective, however, social entitlements such as welfare and EI are an important means to protect the wages and conditions of working people. Decent welfare and unemployment benefits provide a security guarantor for wage workers who may fear losing their jobs. When decent social entitlements exist, invariably workers’ bargaining power is improved. In short, the strength of welfare and unemployment benefits helps determine a country’s social wage — its generally accepted minimum pay and benefits.

Corporate lobbysts understand that larger social entitlements drive up the social wage, which displeases them immensely. Why? Because the higher the social wage, the more business owners must pay their employees. They recognize, however, that to reduce their salary costs a multi-pronged attack against wages is needed. Simply cutting their own workers’ salaries is only effective to a point. If workers feel they deserve better wages, and social entitlements are available, they will refuse to accept less than the prevailing social wage.

Lobbyists for wealth-holders certainly understand the relationship between social entitlements and the social wage. Business organizations have ferociously attacked social entitlements over the past 20 years. In doing so, they’ve driven down the social wage and increased the proportion of income going to the relatively small number of wealth-holders.

The corporate sector’s drive to reduce the social wage does not end with its assault against welfare and unemployment benefits. The government sector is also attacked to help reduce the social wage. That is because unionization rates are substantially higher in the public sector. Only 16 per cent of Canadian private sector employees are unionized, whereas the rate is 71 per cent in the public sector.

Governments that, on some level, must be responsive to the democratic will are usually less fierce in their attacks against unionization. As a result of higher unionization rates government-run services typically pay workers somewhat better average wages, which drives up the social wage.

A slew of studies have examined wage and benefit differentials between public and private sector occupations. They show that clerical and other ‘service’ workers in the public sector are paid significantly better than their private sector colleagues. (Managerial and other high-status jobs usually pay better in the private sector.)

To the chagrin of business owners, the wages and benefits of public sector workers provide some point of comparison for similar private sector workers. That is why groups like the Canadian Federation of Independent Business, one of Canada’s largest business lobby groups, devotes significant energy to the issue and have repeatedly called on the government to freeze public sector pay.

Capitalists understand that the stronger the social entitlements the higher their wage costs. But they do not come right out and say, ‘Let’s lower social entitlements so we will be better off’. Instead, they divide and conquer. They play off workers against welfare recipients.

It’s important to not fall into this trap.

Yves Engler is a researcher with the Communications, Energy and Paperworkers union of Canada. His most recent book is The Ugly Canadian: Stephen Harper’s Foreign Policy.

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