Ed Miliband’s new buzzword is “Predistribution” – it sounds good, but…

September 6, 2012 7:26 am

Yesterday Ed Miliband rolled out a new buzzword yesterday – predistribution – in his interview with the New Statesman. Within a few hours all budding Ed Milibandistas around Westminster and beyond were beginning to grapple with the term. By early evening they were using it as if it had always been part of their political lexicon. By last night I had already heard two people utter the phrase “Of course we should be focussed on predistribution”. And they say that leader’s can’t make the political weather anymore. Today he’ll seek to redouble that weather making with a speech at Policy Network, followed by a Q&A with Ed Balls. (Both men have laughed off rumours of a row between them, this is their change to publicly prove it.)

Of course predistribution isn’t new, and Miliband isn;t the first to have used it. Rachel Reeves wrote about it in her chapter for the recent Fabian pamphlet “The Shape of Things to Come” (which is a veritable who’s who of Ed Milibanism), and it was coined by the Yale professor Jacob Hacker. The reason it’s of interest to Miliband though is that it ties together many of the these he has been focussing on since his leadership bid in 2010 – h0w can Labour make work pay, how can work be made more fulfilling, how does Labour improve the lives of people when, to coin a phrase, there’s “no money left”?

Predistribution – essentially, a fairer distribution of wealth before taxation, rather than after – seems to be the answer, and an encapsulation of much of Miliband’s thinking – especially the move to a “living” wage. It has real appeal as a way to make businesses part of the solution for a more equal society, not through taxation but through ensuring they pay a fair salary to begin with. Predistribution also appeals in terms of providing people with an income that they can live on so that the government is no longer forced to subside poverty wages through tax credits and housing benefit.

It also accepts something that Labour people are often loathe to accept – that the minimum wage was not an unmitigated success, largely because it only proscribes the minimum that someone CAN be paid, not the minimum that the NEED to be paid in order to live.

It all sounds good, but there’s a but…(isn’t there always).

How does predistribution work for the huge proportion of the population who are no longer in work (the retired), who have yet to find work (the young unemployed) and those who may never be able to work (those with severe disabilities)? Clearly for these groups – a number that already totals millions, and will rise as the economy continues to struggle and the population ages – predistribution is not enough, and good old fashioned redistribution by the exchequer will be neccessary – especially if the party is continue to target child poverty (for example).

In fairness to Miliband, he seems to acknowledge this, but in their enthusiasm for a “new economy”, those around him must make sure that those for whom predistribution is impossible are not left behind by Labour, especially at a time when getting a job, any job, is not a simple task.

  • Redshift1

    Not a massive fan of the phrase but the good thing of course is that actually because our economic problems are tied to low excess income and therefore low demand. So bumping up wages not only redistributes wealth but kickstarts spending. This contrasts with the Tory view of ignoring demand and trying to put more and more burden on ordinary working people – with predictable economic effect. 

  • http://twitter.com/blue_burmese blueburmese

    It’s admirable to want to increase the living standards of the lowest paid and reduce benefits dependency, but this doesn’t address the underlying causes of low wages.  We don’t have a shortage of people who will work for minimum wage especially since migrants from the A8 countries were allowed to come here and work without restrictions – that is what has kept wages down.  Those Brits with no skills, no experience, and no job have absolutely no hope of competing with them and leaves them trapped on benefits.
    It is also important to consider what the impact on jobs will be if you make employment more expensive.  The small businesses which are getting hammered on price for goods and services at the moment are unlikely to be able to pass this cost on to the customer or absorb the additional cost.  Therefore the only other option for them to survive is to reduce the number of people that they employ.

    • prsjm3qf

       I own a small business and I have just been forced into this position. What people of a left wing persuasion are unable to grasp is that many people simply are not worth minimum wage in the competition for survival at the bottom end of the economy – where many people are employed. As a small employer you are simply better off without them. Increasing the cost of employing people who are already only marginally employable will not make things better. It will suck in immigrants and put the duffers on the dole. The stock answer is “Training and Skills”. Well training a duffer just gives you a more highly trained duffer. Been there, done that. I think the source of the problem is in the education system. It isn’t about training or pay, it’s about attitude.

  • http://twitter.com/shibleylondon Dr Shibley Rahman

    fascinating, thanks

  • ColinAdkins

    Who knows we may next get Ed talking about the expropriation by businessmen of the surplus value created by workers and the need to produce legislation which will enable trade unions to reduce the gap between the salaries paid and the value created. He may even mention the M word. Wake up Colin your dreaming again.

  • charles.ward

    At least the term “predistribution” recognises the fact that increasing the minimum wage redistributes wealth and the rest of us will have to pay for it in higher prices.  What next, a recognition that it destroys jobs?

    • PeterBarnard

      Although increasing the minimum wage redistributes wealth, there is no reason why it should result in higher prices, or a loss of jobs, because the wages bill in a company can be redistributed by the company itself ….

      Robert Bosch (of the substantial German engineering company) : “People think that because I am rich, I can afford to pay high wages. They are wrong. I am rich because I pay high wages” (or words to that effect).

      • charles.ward

        How are you going to ensure that companies redistribute this from other, well paid, employees and not from shareholders (pensions) or consumers (higher prices)?

        Given that we have a progressive tax system a redistribution of wages towards the low paid would lead to less tax revenue, how would this gap be filled, or will it just be added to the deficit?

        • PeterBarnard

          Well, it happened between 1945 and 1979, and there’s no reason why it can’t happen again. Robert Bosch was able to figure it out …

          You miss the whole point with your “less tax revenue” : if the wages were pre-distributed in the first place by employers, there would no need to collect tax from high-earners to provide top-ups to those on lower wages.

          I doubt that there would be an increase in prices or decrease in profits. The increase in employee morale would quite possibly, if not probably, enhance productivity. Again, Robert Bosch as an example.

          Interestingly, two virile supporters of capitalism – Barclays and KPMG – already voluntarily pay more than the minimum wage requirement in London. Barclays also requires its suppliers and contractors (eg cleaners) to pay the same rate as the Barclays minimum.

          • charles.ward

             I think you are right on the tax revenue front.   The marginal rate of tax (when you include benefits) for at least some of the low paid will be higher than for the higher paid.  Of course with such high marginal rates of tax the net effect on the poor of any rise in the minimum wage would be drastically reduced.

            On Barclays and KPMG, some companies (especially those based in London) need to pay the minimum wage or above to attract people, others don’t.

            I did post a link to a study indicating that prices did rise above inflation in sectors where there were large numbers of low paid workers when the minimum wage was introduced.  It seems to be lost in the moderation queue.

            This new moderation system is a real pain in the a***.

          • markfergusonuk

            Sorry to disappoint, but the new moderation system is still necessary Sent from my BlackBerry® smartphone

          • jaime taurosangastre candelas

            You may be right Peter (….higher productivity), but I don’t think that is the only likely or possible outcome, and that even if it does occur, there may be an unintended consequence.

            I think prices are equally likely to rise to counter increased costs of employment and to maintain profit at the before-predistribution levels, because that is standard neo-liberal behaviour.  It would take a huge shift in thinking for the British economy to be turned on its’ head, and even then we are not alone in the world, and predistribution may spur even more outsourcing to other countries.  In addition, if workers are more productive (say 10%), then what is the incentive for the employer not to lower the workforce by 10% to achieve the same overall productivity at 90% of the cost of employment?  The overall size of the market is unlikely to change with predistribution.

            There is also human nature:  how long would the rise in productivity last?  You hear people saying that 2-3 months after receiving a pay rise, they have got used to the extra money and no longer notice it (ie their expenditure rises to suit).

            There is also the likely impact that prices for government purchasing goods and services from the private sector will rise:  if it is Government policy to increase the costs of employment on a business, they will simply turn around and pass those costs back to the purchasing authorities.  So in addition to any overall change in Government payments on social security or tax revenues, costs of buying are likely to rise.

            (Ironically, my spell-check keeps trying to correct predistribution to redistribution – is the software trying to tell me it is an unworkable concept?)

          • PeterBarnard

            Jaime,

            Historically/long term since the late 18C, output has risen by more than prices, and any gain in productivity tends to be embedded into a particular process.

            The returns to land, labour and capital in the form of rent, wages and profits over the same long term have fluctuated*. It’s not just a simple matter of wages up = profits down : both can increase at the same rate.

            Total factor productivity (for the whole economy between 1856 and 1973) was in a range of 0.45% per annum (1873-1913) to 2.42% per annum (1964-1973)**. TFP has also fluctuated between industries over the years.

            It appears that (labour) productivity at present is negative ; total hours worked per week are up 2.1 per cent since the General Election, and growth is zero, even as about 500,000 employees have been lost in the (“non-productive”) public sector, and about 800,000 been added to the (“productive”) private sector. Of course, labour needs  capital (tools, equipment and technology) to enhance productivity. Labour also needs increasing levels of skills for productivity to be maintained, too.

            * British Economic Growth 1856-1973/Matthews, Feinstein and Odling-Smee

            ** ibid

          • PeterBarnard

            Jaime,

            Historically/long term since the late 18C, output has risen by more than prices, and any gain in productivity tends to be embedded into a particular process.

            The returns to land, labour and capital in the form of rent, wages and profits over the same long term have fluctuated*. It’s not just a simple matter of wages up = profits down : both can increase at the same rate.

            Total factor productivity (for the whole economy between 1856 and 1973) was in a range of 0.45% per annum (1873-1913) to 2.42% per annum (1964-1973)**. TFP has also fluctuated between industries over the years.

            It appears that (labour) productivity at present is negative ; total hours worked per week are up 2.1 per cent since the General Election, and growth is zero, even as about 500,000 employees have been lost in the (“non-productive”) public sector, and about 800,000 been added to the (“productive”) private sector. Of course, labour needs  capital (tools, equipment and technology) to enhance productivity. Labour also needs increasing levels of skills for productivity to be maintained, too.

            * British Economic Growth 1856-1973/Matthews, Feinstein and Odling-Smee

            ** ibid

          • PeterBarnard

            Jaime,

            Historically/long term since the late 18C, output has risen by more than prices, and any gain in productivity tends to be embedded into a particular process.

            The returns to land, labour and capital in the form of rent, wages and profits over the same long term have fluctuated*. It’s not just a simple matter of wages up = profits down : both can increase at the same rate.

            Total factor productivity (for the whole economy between 1856 and 1973) was in a range of 0.45% per annum (1873-1913) to 2.42% per annum (1964-1973)**. TFP has also fluctuated between industries over the years.

            It appears that (labour) productivity at present is negative ; total hours worked per week are up 2.1 per cent since the General Election, and growth is zero, even as about 500,000 employees have been lost in the (“non-productive”) public sector, and about 800,000 been added to the (“productive”) private sector. Of course, labour needs  capital (tools, equipment and technology) to enhance productivity. Labour also needs increasing levels of skills for productivity to be maintained, too.

            * British Economic Growth 1856-1973/Matthews, Feinstein and Odling-Smee

            ** ibid

          • PeterBarnard

            Jaime,

            Historically/long term since the late 18C, output has risen by more than prices, and any gain in productivity tends to be embedded into a particular process.

            The returns to land, labour and capital in the form of rent, wages and profits over the same long term have fluctuated*. It’s not just a simple matter of wages up = profits down : both can increase at the same rate.

            Total factor productivity (for the whole economy between 1856 and 1973) was in a range of 0.45% per annum (1873-1913) to 2.42% per annum (1964-1973)**. TFP has also fluctuated between industries over the years.

            It appears that (labour) productivity at present is negative ; total hours worked per week are up 2.1 per cent since the General Election, and growth is zero, even as about 500,000 employees have been lost in the (“non-productive”) public sector, and about 800,000 been added to the (“productive”) private sector. Of course, labour needs  capital (tools, equipment and technology) to enhance productivity. Labour also needs increasing levels of skills for productivity to be maintained, too.

            * British Economic Growth 1856-1973/Matthews, Feinstein and Odling-Smee

            ** ibid

          • rekrab

            “The great crash 1929″ One of the 5 identified reasons was “bad distribution of income” good pay makes good ways….what do you hear! what do you say!!!!!

          • PeterBarnard

            I can only agree, Derek (“bad distribution of income pre-1929″). Or rather, it has been remarked on by a number of economista.

            We had something similar – well, the Americans did – pre-2000.

            In 2000, the S & P 500 was a higher multiple of earnings than it was in 1929 … no wonder it has been in the doldrums since then

      • charles.ward

         This study seem to indicate that the introduction of the minimum wage did increase prices.  It shows that prices in sectors employing large numbers of low paid workers rose more quickly than prices in general.

  • Pingback: Ed Miliband wants a move away from redistribution; Ed Balls says 'tax the rich till their conservatories squeak' – Telegraph Blogs

  • http://www.themoronmormon.com/ TheMoronMormon

    I Always Thought Predistributioning In A Public Place Was A Criminal Offence.

  • As_expected

    ‘and those who may never be able to work (those with severe disabilities)’

    The solution is obvious: you snuggle up to Unum, adopt some crap that let’s you tell yourself that people aren’t really ill, enforce it with weaselly, outsourced denials, and ignore the victims who suffer, die in misery, or just plain hang themselves to save time.

    Yes, you: the Labour party. IDS must have cracked open the champagne when he realised what a gift you’d given him.

  • Mr Arthur Cook

    “Predistribution”? So it’s sort of the idea that instead of allowing people to be exploited and then giving them a little back in order that they can continue to earn profits for their masters…it means that the wealth produced is fairly distributed in the first place?

    My God……that’s an astounding idea!!!!! It echoes in my memory with something I once read somewhere. I can’t remember where it was……????
    NOW I REMEMBER!!!!!
    It was on the back of my old Labour membership card…in the days before New Labour decided that celebrity and trickle down were the way to the nations hearts.
    What did it say?
    To secure for the workers by hand or by brain the full fruits of their industry and the most equitable distribution thereof that may be possible upon the basis of the common ownership of the means of production, distribution and exchange, and the best obtainable system of popular administration and control of each industry or service. 

  • Jeremy_Preece

    For those of us old enough to remeber the late Roy Castle presenting Record Breakers on TV, we probably remeber him singing that theme tune called “dedication” (dedication is what you need, if you want to be the best and you want to beat the rest… etc. etc.)
    I can’t get that theme out of my head, and I keep hearing the word “dedication” replaced by “predistribution”. It fits and it is disturbing me.
    Ah. Time for bed.

    • markfergusonuk

      “If you wanna be a social democrat, oooohhh….”

      Maybe not…
      Sent from my BlackBerry® smartphone

      • Jeremy_Preece

        You might have something there

        Just imagine performing the whole thing with new lyrics at the party conference. It would really put the tin lid on Labour’s chances at the next election.

        Sleep deprivation is a terrible thing…

  • Pingback: Problems of predistribution….. «

  • markfergusonuk

    “Not worth minimum wage” – considering minimum wage isn’t enough to survive on, that’s a remarkable statement

    • prsjm3qf

      It’s not a remarkable statement at all. Many businesses, mostly the marginally profitable ones that are usually relatively labour intensive, are very sensitive to relatively small fluctuations in the competence of their staff. This is why Polish immigrants are so popular. Many employers have found that employing a competent person with drive on £10 per hour is vastly better than employing an incompetent person on minimum wage. The belief the left has, that by paying someone more and training them they will suddenly become competent simply isn’t true. You just end up with a workforce full of better paid, better trained incompetents. I have many experiences where I would have been better off paying someone minimum wage to go away and not come to work at all! If you do not understand this you have (like our political class) never owned a manufacturing business. This reality may be the fatal weakness in Milibands “predistribution” wheeze.
      ps Don’t confuse the parasites in The City with real business. Ordinary businesses are rooted in the community and are usually dependent on ordinary people as both workers and customers. We have no interest in ordinary people being poor. But we also have no interest in paying lazy people to do nothing (aka redistribution – Labours Big Idea).

  • Pingback: Can Predistribution deliver Responsible Capitalism? — Social Europe Journal

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