November 21, 2016
The public sector strikes are really about housingPosted in Sunday Business Post · 130 comments ·
Make no mistake about it: the series of public sector strikes that we have experienced — and are about to see more of — are entirely linked to housing. The fact that middle-ranking public sector workers can’t, or at least don’t feel that they can, afford to live in this country is at the root of the latest industrial unrest. For the state, the message should be clear: fix housing and you more or less fix most of the grievance. In contrast, allow the continuation of the dysfunctional market for housing and accommodation in general, and you have a recipe for industrial relations war.
So if the main reason the public sector unions are on strike is the price of housing, there’s an obvious solution: link pay rises to the provision of affordable housing. If the main driver of wage demands, particularly for younger workers, is the cost of accommodation, then the obvious thing to do is link the two. Let one police the other.
At the moment, we have the ludicrous situation where all workers are seeing their take-home pay eroded by the high cost of accommodation. This leads to strikes (in the public sector) for more wages, as workers try to maintain their after-rent standard of living. It is not hard to see how this leads to a hamster-on-a-wheel scenario where higher accommodation costs lead to higher wages, which in turn lead to higher house prices, and so on.
The way to stop this is to give the state an incentive to keep house prices and rental costs down. At the moment, there is no real incentive for the state to get housing costs under control. However, if we were to link wages to housing costs, we could force the state to take the housing crisis seriously.
The original partnership model was based on traded economy-wide wage moderation for tax cuts. The state undertook to cut taxes — and in turn the unions undertook to keep wage demands moderate.
If we swap tax cuts for housing costs, we would have a mutually dependent framework for linking wages to housing. If the state can’t get housing costs under control, then wages rise across the board, the budget deficit rises, taxes rise and the government will get booted out.
Thus, the government’s entire economic strategy would become dependent on keeping housing costs down. With such a framework, the state must act to keep costs down — rather than the situation now, where it really has no skin in the game. It bears no responsibility because it doesn’t have anything to lose. It can blame developers or builders or banks or vulture funds and simply throw its hands up ineffectually as if it’s not the state’s problem.
By linking wages to housing, we break this cycle of mutually assured irresponsibility.
Maybe it is because I am in Italy, the home of Mussolini’s corporatism – the biological father of social partnership – that this idea seems to jump off the page at me.
If the public sector unions want to reinstate social partnership à la Bertie Ahern and if employers want to do something similar, then this new partnership approach can be modified to benefit everyone, not just the unions with a stake in the talks.
Such an all-inclusive approach was Mussolini’s model, after all — corporatism per tutti!
So let’s think about an arrangement where everyone gains.
Linking future wage demands to the price of accommodation would build into the housing market a massive incentive for the state and employers’ groups, as well as the unions, to actively bring the cost of accommodation under control.
When you stand back and look at the domestic economy, it’s hard not to conclude that if we sort out housing, we’d begin to sort out lots of things.
If the state — either itself, or via collaboration with private developers — could accelerate cheap house and apartment building, much of the upward pressure on costs in this country would dissipate.
By linking national competitiveness directly with accommodation costs, we would focus the minds of everyone.
This would also impact on the disruptive part-time landlord business. The one-off landlord racket sucks cash into the housing market in a haphazard way, leading to all sorts of conflicts of interests, whereby citizens are landlords and workers and voters at the same time.
In future, because individual investors would know that housing costs are now capped, there would be less incentive for the marginal investment to go into property.
In time, the provision of accommodation would become a utility, like the provision of electricity. This would be a low-yield business. The state could easily set up investment funds – as it does for renewable energy projects – to build new houses.
The national pension fund could do this, so that we have a cooperative system which sees pensions invested into housing associations that administer the building of affordable houses.
One obvious drawback of such a plan is the assumption that the state can deliver on its housing targets. If it doesn’t, we would be hostage to a wage/price inflationary spiral driven by housing costs. However, at least in this case, the source of the problem would be unambiguous, and governments would be judged on this one narrow criterion.
A country where housing anchors domestic economic policy would be one where huge innovations in building techniques would flourish. Obviously, innovation in building materials and cost controls would become much more urgent.
In fact, the only sector that would lose out is the sector that finances houses: the banking sector. But reversing the financialisation of the economy can only be a good thing, because without the destabilising impact of speculative capital, we would rule out future booms and bust.
What’s not to like?