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The British Gas hire and fire extravaganza

Summary:
British Gas is offering new contracts to its service engineers. Those who don’t accept the longer contractual hours, plus a marked absence of overtime for weekend etc work, won’t have a contract nor a job. This is being called “hire and fire”. There’s a specific point we’re interested in here and it’s not that Owen Jones has climbed on the soapbox over this - that is so usual as to be not worth noting. It’s also not about the details of the case, rather about the deeper background.It is entirely usual that highly profitable companies pay all their workers more - more than less profitable ones. It is equally usual that highly profitable sectors pay their workers more than less profitable ones. Secretaries in banking get more than those in publishing, this is not something anyone is unaware

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British Gas is offering new contracts to its service engineers. Those who don’t accept the longer contractual hours, plus a marked absence of overtime for weekend etc work, won’t have a contract nor a job. This is being called “hire and fire”.

There’s a specific point we’re interested in here and it’s not that Owen Jones has climbed on the soapbox over this - that is so usual as to be not worth noting. It’s also not about the details of the case, rather about the deeper background.

It is entirely usual that highly profitable companies pay all their workers more - more than less profitable ones. It is equally usual that highly profitable sectors pay their workers more than less profitable ones. Secretaries in banking get more than those in publishing, this is not something anyone is unaware of.

Much of the inequality of pay across the country is caused by this very factor, wages differing in profitable companies and sectors from those in un- and less so.

Why this is so is that highly profitable companies tend to share that good fortune with the workforce. Similar to, although of course not exactly the same as, a worker’s cooperative like John Lewis sharing the profits that good fortune, or good work, good management, whatever, brings in. A bigger pie seems to bring with it more generosity in cutting the slices if we like.

All of which we’re fine with. We of course want workers to go where profits - the value added from their activity - are higher. We’re entirely delighted with labour incomes rising from that same factor as well.

Which brings us to the deeper point. Imagine this has been true in a place, sector or company for some time. Then it changes. The business itself, or perhaps the occupation, becomes less profitable. There is less value being added by the activity that is. So, what should happen to compensation of the workers? Defined properly here, as that mixture of income and working conditions that make up the total payment for doing the job?

If, in the good times, compensation increases, as it does, then shouldn’t this all go into reverse in the bad? If the workers do get that share of higher profits then why not of lower?

Or, as this gets cast in public politics, why is it a scandal that profitable companies don’t raise wages but equally a scandal that unprofitable cut them?

We can, of course we can, insist that wages are the payment due to labour and shouldn’t be reliant upon profits at all. But if that’s true then why is it that high profits are seen as the reason why wages should rise in the first place?

That is, there’s more than a little cakeism on display here.

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Tim Worstall
Tim Worstall is a British-born writer and Senior Fellow of the Adam Smith Institute. Worstall is a regular contributor to Forbes and the Register. He has also written for the Guardian, the New York Times, PandoDaily, the Daily Telegraph blogs, the Times, and The Wall Street Journal. In 2010 his blog was listed as one of the top 100 UK political blogs by Total Politics.

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