Any worker who`s ever complained to their boss and been told “if you don`t want to work here there are plenty who do” will understand why Karl Marx described the role of the unemployed (and underemployed) under capitalism as “the reserve army of labour”.
The press and politicians take every opportunity to divide and rule the working class by casting suspicion on those who are unemployed, but those in work know that the very threat of unemployment helps the bosses to impose their will on us. When unemployment rises, the threat is greater, and employers become bold enough to force pay cuts on workers.
Mainstream economists have a more academic approach and study the labour “market” in great detail, but just like the bosses they recognise the importance of unemployment under capitalism. In the late 1960s influential US economist Milton Friedman came up with the term “the natural rate of unemployment” and claimed that if unemployment fell below this rate then inflation would increase. Friedman understood that low levels of unemployment give confidence to workers, who can fight for better pay and conditions. When they`re successful, the profit margins of capitalists are reduced, causing them to put their prices up in response.
During the last boom the ruling class became very nervous about falling unemployment – a Financial Times editorial published on September 11, 1998 told its readers that unemployment would have to rise, “perhaps by 500,000”! Three months earlier the Bank of England`s Monetary Policy Committee (MPC) had raised interest rates to 7.5% after concluding that “it was probable that unemployment would have to rise to hit the inflation target”. Higher interest rates are used to increase unemployment during booms by reducing consumption and new investment.
Fine-tuning the reserve army of labour
The economists on the MPC not only want “enough” unemployment, they also want the “right type” of unemployment. Six months after Chancellor Gordon Brown created the MPC, in its December 1997 meeting the Committee asked itself “did short-term unemployment exert more downward pressure on earnings than long-term unemployment?”. They concluded that “short-term unemployment was more important”, on the grounds that “when the proportion of long-term jobless was high…..workers would probably realise that they could not be replaced so easily, and hence that their bargaining strength was higher”.
The so-called “reforms” of the labour market in recent years have been designed to ensure that the unemployed are seen by workers as more of a threat to their jobs. State subsidies to employers encourage them to take on the unemployed and sack existing workers. The ultimate subsidy comes in the form of workfare – where new workers are paid nothing by their employers, and merely receive their state benefits in return for a full day`s work.
David (now Lord) Freud, the man in charge of Labour`s welfare reform when the UK economy went into recession, told the Daily Telegraph in February 2008 that “we should have recessions every five or six years and we are due one”. Earlier in the same interview Freud claimed it was possible to get “about 1.4 million back to work”! A year later Freud joined the Conservative Party, and shortly afterwards appeared on Radio Four`s Today programme (16 February 2009) where he said the following about the private companies bidding for contracts to help the long-term unemployed back to work:
“there are fewer vacancies, there are more jobless, which could actually be good news for the private companies”
The propaganda of the ruling class has attempted to blame the persistence of unemployment on trade unions, employment protection legislation, the minimum wage, and any other progressive reform which has improved the situation of working people since the appalling conditions of the nineteenth century. The real culprit is an economic system where profit is maximised by minimising wages.