Reduction of working hours and salaries: What is going on?

8 October, 2021

Desigual workers vote a reduction in working hours with inferior wages at Desigual
Desigual workers vote a reduction in working hours with inferior wages at Desigual

Yesterday in Spain all TV news programs devoted an unusual amount of space to the “referendum” at Desigual regarding the reduction of working hours. They insisted that “the reduction in salary is shared equally between the workers and the company”. Yes, they are peddling a model and yes, there is a catch. From Japan to the U.S. via Ireland, France and Great Britain, the so-called “recovery” is being accompanied by a reduction in workers’ incomes dressed up in different ways. Reduced working hours is just one of them.

Table of Contents

Shortening the working day: from the Telefónica fiasco to Desigual

Telefónica, first -failed- Spanish attempt to lead workers to a reduction in working hours and salary
Telefónica, first -failed- Spanish attempt to lead workers to a reduction in working hours and salary

Since last June, Spanish capital has been trying to implement a model of shorter working hours with reduced salaries, for its own reasons, both general and specific to each company. The starting point was Telefónica, one of the big monopolies and also one of the mainstays of foreign imperialism most affected during the long crisis that began 12 years ago.

Not even the most conservative business press was unaware of the company’s motivations:

It does not seem, for instance, far-fetched to think that Telefónica would agree to such a disruptive measure as the four-day working day because it needs to reduce the cost of its payroll and has already determined that it can do without a large percentage of its staff for one day- [… ] Teleworking may have alerted the employer to the possibility of creating low-cost work structures, with a higher percentage of freelance employees, at the time cheaper in terms of paying social costs

La Información, 20/9/2021

But Telefónica workers rejected the reduction in working hours coupled with lower wages. The company hoped to have at least 10% of the workforce, 2,000 workers sign up for a pilot test. It did not succeed. Only 156 were willing.

In the case of Desigual, the result has been different because the workers themselves have interpreted it as “a covert lay-off”. The situation of the company, very financialized since its beginnings, is disastrous: it lost 38% of sales at a point when it had already been in a long decline since 2014. Now between the layoffs of those who refuse to accept the reduction in working hours and the 6.5% salary reduction of the remaining ones, it hopes to increase profitability.

Among other things because the reduction in working hours is not only accompanied by a reduction in wages but also by a commitment to carry out the same workload … with fewer hours and fewer workers. The dreamed lay-off plan of any large Spanish company, and with a complimentary campaign in the media touting the company as a social model.

Read also: 4-day working week: dress rehearsal with full pay cut, 16/6/2021

Inflation joins forces with reduced working hours in accelerating the drop in hourly wages

U.S. nominal minimum wage (dark blue line) and real minimum wage measured in 2021 dollars (light blue)
U.S. nominal minimum wage (dark blue line) and real minimum wage measured in 2021 dollars (light blue)

In the U.S., reductions in working hours and inflation are coming together to produce a lowering of not only total take-home pay but also hourly wages for workers.

The drop in real wages is inevitably producing “labor shortages,” as in Britain and, in the context of a labor market with free and generally costless dismissal, an “extreme turnover” of workers.

“There are weeks when you hire 500 to 800 people, but at the same time you lose 300 to 400 employees,” said the head of casino operator MGM Resorts International, Bill Hornbuckle. A Cleveland-area metals factory reported that a quarter of its workforce had only been on board for three months or less.

Hoteliers say nearly one in two people quit after one or two months. […]”Six out of 10 newly hired employees didn’t show up for their shifts,” David Allen, head of Cuisine Unlimited catering company in Salt Lake City

Der Spiegel
Read also: Reduction of working hours and minimum wage rising in the US, 30/6/2021

In Britain, Johnson called on employers to raise wages instead of calling for more migrants at low wages. Old trickster, he already knew that wages are slowly starting to move upwards… while inflation climbs faster and faster. In other words, that real wages per hour worked are falling.

In Germany, with no hikes in wages, inflation is at more than decade-long records rapidly eroding the real purchasing power of wages. The German bourgeoisie is no longer afraid of price index rises. In fact they calculate that until the mid-2040s they will continue to rise as a result of the Green Deal. The differential between wage growth and inflation allows them to be pleased with the nominal increase in wages while the transfer of income from labor to capital continues unabated.

In fact, the fall in real wages in new hires is an almost universal phenomenon by now. Japan’s prime minister has begun his term in office by promising that he would do everything in his power to raise hourly wages. The promise was little more than a toast to the sun and did not deserve neither passions for nor against: in his program he did not list a single measure which was not oriented to reduce business costs.

Workers lose lifespan with every attack

The basic shopping basket increasingly represents a larger percentage of our wages
The basic shopping basket increasingly represents a larger percentage of our wages

The consequences of all this are not temporary – “a few more months” as the bourgeoisie says – and are not just going to consist of “a little more tightening of our belts.”

We have a good example in Ireland, where the erosion of purchasing power by electricity prices is also beginning to be felt and where even green voters are beginning to distrust the meaning of the Green Deal.

There, eating healthy would come to account for 35% of a working family’s income, which is unsustainable with falling real wages and declining purchasing power – not least because of rising housing costs. So the typical working family spends only 17.5% on food and given what industry offers at lower prices, the epidemic of type 2 diabetes and heart disease grows.

In Spain the situation is no better: food is escalating in price and has already reached the highest prices in the last ten years. Figures that are beginning to become common in an increasing number of countries. And which are added to the hike in rental and housing prices such as in Ireland and the USA.

It’s not really a housing, food or electricity problem. The problem is that wages are losing purchasing power, that their rises are illusory because they are eaten up by prices and above all that every bite at our purchasing power leaves scars.