One of the things the private sector in the UK don’t seem to understand is just how much the public sector underpins their ability to keep costs and wages low.
The welfare state provides all sorts of services and assets that enable businesses to externalise many of the costs they would otherwise need to par at commercial prices. Rubbish and waste collection is perhaps the most obvious, along with the police and justice system, planning system, fire service, national defence system, International system of Ambassadors and Consulates and transport infrastructure. By spreading the costs of these services and assets across the entire population we are able to avoid duplication of provision (thus making these public services more, or at least equally, efficient as commercial versions of the same services would be) and reduce the cost to individual businesses by everyone contributing through taxation.
In terms of wages there is a popular argument amongst the free-marketeers that a welfare state corrupts the free operation of the labour market and leads to vast numbers of able workers who are not prepared to work for the money the market can afford, and prefer to live on benefit instead. This it argues keeps wages artificially high, thus discouraging entrepreneurial initiative and economic growth.
However, I would argue that a reverse argument applies equally well. i.e. that the public provision of a number of social services has enabled workers themselves to externalise significant amounts of their own personal costs and that this in turn has enabled private industry to keep wages artificially low.
The most obvious of these social services are education, social housing and the health service. There are millions of people in this country on full-time contracts who earn less than £15,000 a year. There are millions more who work several part-time jobs in order to achieve incomes of less than £10,000. Wages at these levels are only credible in the UK today if a substantial welfare state provides support to these low paid workers. Social housing with capped rents and low cost housing association part-buy properties are crucial to the survival of workers on these salaries. As are health care at the point of use and a free education system.
If these low paid workers had to take out health insurance, pay for their children’s education and pay the full cost of buying or renting property, then their wages would have to double or more to meet those costs.
The private sector’s head-long, glee-full rush to dismantle the welfare state is profoundly mistaken not just because of the social injustice that such destruction will inevitably bring about but because cuts on this scale are simply not in their own interests.
I Am Not A Number
Political and Philosophical Dispatches From An Individual Living In A Society