By Finlo Rohrer BBC News Magazine MPs are being asked, so are police officers, so are prison officers. Across the public sector workers are being urged to accept modest pay settlements, but would you take an effective pay cut because society needs you too?
By Finlo Rohrer BBC News Magazine MPs are being asked, so are police officers, so are prison officers. Across the public sector workers are being urged to accept modest pay settlements, but would you take an effective pay cut because society needs you to?
Gordon Brown wants you to do something.
Gordon Brown wants you to do something.
He'd be really happy if you would accept a pay rise of, say, 2%. With the Consumer Price Index - one of the key measures of inflation - standing at 2.1% that would be a small real pay decrease. If you take the Retail Price Index measure of 4% it is a big cut.
He'd be really happy if you would accept a pay rise of, say, 2%. With the Consumer Price Index - one of the key measures of inflation - standing at 2.1% that would be a small real pay decrease. If you take the Retail Price Index measure of 4% it is a big cut.
But no-one wants this
And if that's really too much of a privation for you, could you certainly keep it under 2.5%? It would really help the economy at a time when things are not looking too rosy. Anything over that really would be rather imprudent.
And if that's really too much of a privation for you, could you certainly keep it under 2.5%? It would really help the economy at a time when things are not looking too rosy. Anything over that really would be rather imprudent.
Mr Brown's not the first prime minister to urge pay restraint, particularly among public sector workers, to provide a brake on inflation. High prices for oil, food and other commodities are among the main drivers of inflation, but public sector salaries are one of the few parts of the economy that Brown can have a direct effect on.
Mr Brown's not the first prime minister to urge pay restraint, particularly among public sector workers, to provide a brake on inflation. High prices for oil, food and other commodities are among the main drivers of inflation, but public sector salaries are one of the few parts of the economy that Brown can have a direct effect on.
If there are big pay settlements across the whole of the UK workforce then it might contribute to inflation, and as we all know, too much inflation is bad.
If there are big pay settlements across the whole of the UK workforce then it might contribute to inflation, and as we all know, too much inflation is bad.
In one newspaper last month, Gordon Brown was said to have described MPs who desired an above-inflation pay rise as "selfish". That kid of emotive language is hard to square with the image of the prime minister, but there is no doubt that many of the protagonists in the current rows over pay take the matter personally.
In one newspaper last month, Gordon Brown was said to have described MPs who desired an above-inflation pay rise as "selfish". That kid of emotive language is hard to square with the image of the prime minister, but there is no doubt that many of the protagonists in the current rows over pay take the matter personally.
WHAT IS 'MONEY ILLUSION'? Where a worker on £10,000 a year getting a £1,000 pay rise at a time of 11% inflation feels less hard done by than... ...a worker who gets no pay rise at a time when there is negligible inflation
WHAT IS 'MONEY ILLUSION'? Where a worker on £10,000 a year getting a £1,000 pay rise at a time of 11% inflation feels less hard done by than... ...a worker who gets no pay rise at a time when there is negligible inflation
MPs should be setting an example, Brown thinks, to encourage the rest of the public sector to accept their 2% or thereabouts without trying to force the government's hand with protests and strikes.
MPs should be setting an example, Brown thinks, to encourage the rest of the public sector to accept their 2% or thereabouts without trying to force the government's hand with protests and strikes.
For some there may even be a moral as well as a practical argument. Could you accept a pay cut or a low pay rise for the greater good? And should you?
For some there may even be a moral as well as a practical argument. Could you accept a pay cut or a low pay rise for the greater good? And should you?
According to Parantap Basu, professor of economics at Durham University, we are not very good at accepting a reduction in the figure we earn, even if we are not losing out in real terms.
According to Parantap Basu, professor of economics at Durham University, we are not very good at accepting a reduction in the figure we earn, even if we are not losing out in real terms.
"People won't accept a wage cut of 10% even if prices go down 10% and so you have the same purchasing power. Workers attach more importance to nominal wage not real wage," Basu says.
"People won't accept a wage cut of 10% even if prices go down 10% and so you have the same purchasing power. Workers attach more importance to nominal wage not real wage," Basu says.
We want an increase in the numbers, whatever the circumstances. A drop in our nominal salary accompanied by a rise in our real salary, say at a time of heavy deflation, makes us unhappy. Economists call this "money illusion".
We want an increase in the numbers, whatever the circumstances. A drop in our nominal salary accompanied by a rise in our real salary, say at a time of heavy deflation, makes us unhappy. Economists call this "money illusion".
INFLATION Consumer Price Index: 2.1%Retail Price Index: 4%RPIX: 3.1% (RPI excluding mortgage interest)Different measures of prices of goods and services
INFLATION Consumer Price Index: 2.1%Retail Price Index: 4%RPIX: 3.1% (RPI excluding mortgage interest)Different measures of prices of goods and services
And where workers do accept a drop or a minimal rise in their nominal wage, there tends to be a simple trade-off. Some time ago tanker drivers at the British Oxygen Company were told that they needed to work longer hours for no extra money so the company could fight off competition.
And where workers do accept a drop or a minimal rise in their nominal wage, there tends to be a simple trade-off. Some time ago tanker drivers at the British Oxygen Company were told that they needed to work longer hours for no extra money so the company could fight off competition.
The change helped and within two years the drivers had negotiated a 20% pay rise. It shows people are quite capable of accepting short-term privation for medium-term gain.
The change helped and within two years the drivers had negotiated a 20% pay rise. It shows people are quite capable of accepting short-term privation for medium-term gain.
A moral case?
A moral case?
But the situation for public sector workers is more complicated. There will be no chance of a big payday in the medium term. Besides, many workers in the private sector will be getting pay rises markedly above inflation.
But the situation for public sector workers is more complicated. There will be no chance of a big payday in the medium term. Besides, many workers in the private sector will be getting pay rises markedly above inflation.
Economists think of people as rational agents pursuing maximum utilityThose who get plump rises would then benefit from inflation being under control while at the same time enjoying their rises. Those who accept restraint will have helped others who are not contributing.
Economists think of people as rational agents pursuing maximum utilityThose who get plump rises would then benefit from inflation being under control while at the same time enjoying their rises. Those who accept restraint will have helped others who are not contributing.
So is there a moral case? Are those who accept pay restraint making a contribution to society, discharging an obligation?
So is there a moral case? Are those who accept pay restraint making a contribution to society, discharging an obligation?
Philosopher Julian Baggini says he has every sympathy for those who are pressing for higher wages, but suggests that restraint is really all about practical considerations rather than our duty to our fellow man.
Philosopher Julian Baggini says he has every sympathy for those who are pressing for higher wages, but suggests that restraint is really all about practical considerations rather than our duty to our fellow man.
"In the long run it is to their benefit if the economic argument is right. If inflation is stoked their money will be worth less. The burden isn't being spread evenly, but the burden is never being spread evenly
"In the long run it is to their benefit if the economic argument is right. If inflation is stoked their money will be worth less. The burden isn't being spread evenly, but the burden is never being spread evenly
"People don't protest if their wealth increases at a faster rate than anyone else's. They only complain when it's they who have to suffer."
"People don't protest if their wealth increases at a faster rate than anyone else's. They only complain when it's they who have to suffer."
Roger Crisp, a fellow of Oxford Uehiro Centre for Practical Ethics, says it's possible to make a case that the appeal for pay restraint is an appeal to our moral sense.
Roger Crisp, a fellow of Oxford Uehiro Centre for Practical Ethics, says it's possible to make a case that the appeal for pay restraint is an appeal to our moral sense.
150's your limit
150's your limit
"There is a difference between asking people to make some sacrifice and saying we are going to impose some sacrifice on you. It is entirely reasonable to ask for it. It is entirely reasonable to say no."
"There is a difference between asking people to make some sacrifice and saying we are going to impose some sacrifice on you. It is entirely reasonable to ask for it. It is entirely reasonable to say no."
It's possible but it requires some kind of grand project, by creating a sense of community among 60m people Robin Dunbar And if we don't acknowledge that there is a moral element to accepting lower pay, it may be because we have problems with the scale on which we are being asked to act. Gordon Brown's appeal is for individuals within the public sector to see sense, on the basis their claims will affect the entire British population.
It's possible but it requires some kind of grand project, by creating a sense of community among 60m people Robin Dunbar And if we don't acknowledge that there is a moral element to accepting lower pay, it may be because we have problems with the scale on which we are being asked to act. Gordon Brown's appeal is for individuals within the public sector to see sense, on the basis their claims will affect the entire British population.
Anthropologists say we can comprehend the need to co-operate on a small-scale; understanding the need to work with a family or a team to achieve a common goal. But can we inspire co-operation in a society of 60 million?
Anthropologists say we can comprehend the need to co-operate on a small-scale; understanding the need to work with a family or a team to achieve a common goal. But can we inspire co-operation in a society of 60 million?
Prof Robin Dunbar, director of Oxford University's Director of the Institute of Cognitive and Evolutionary Anthropology, thinks it isn't easy.
Prof Robin Dunbar, director of Oxford University's Director of the Institute of Cognitive and Evolutionary Anthropology, thinks it isn't easy.
"The group sizes that are our natural environment are extremely small - the limit is about 150 people. This 150 seems to set the limit on the number of people you can know as persons, you know how they fit into your social group and how you fit into theirs.
"The group sizes that are our natural environment are extremely small - the limit is about 150 people. This 150 seems to set the limit on the number of people you can know as persons, you know how they fit into your social group and how you fit into theirs.
"It is defined really in terms of those people to whom you owe obligations and from whom you can expect obligation. The people you expect not to cheat you."
"It is defined really in terms of those people to whom you owe obligations and from whom you can expect obligation. The people you expect not to cheat you."
Rational agents
Rational agents
Thus it is very hard for us to do something for a group of 60 million people, all of whom are making different levels of sacrifice and enjoying different levels of reward.
Thus it is very hard for us to do something for a group of 60 million people, all of whom are making different levels of sacrifice and enjoying different levels of reward.
The police say they have had a real terms pay cut"To create what you are having to do is to create almost a fiction that really all these other people are part of the group of 150. It's possible but it requires some kind of grand project, by creating a sense of community," says Prof Dunbar.
The police say they have had a real terms pay cut"To create what you are having to do is to create almost a fiction that really all these other people are part of the group of 150. It's possible but it requires some kind of grand project, by creating a sense of community," says Prof Dunbar.
But the good news is that the assumptions of economists is not that we will all do our bit for the collective good.
But the good news is that the assumptions of economists is not that we will all do our bit for the collective good.
Instead many assume that we as individuals are rational agents attempting to maximise our utility - the amount of happiness we can gain from material things - in the prevailing economic climate.
Instead many assume that we as individuals are rational agents attempting to maximise our utility - the amount of happiness we can gain from material things - in the prevailing economic climate.
On our own we can do nothing to affect the broader sweep of the economy.
On our own we can do nothing to affect the broader sweep of the economy.
"Even if you understand your actions' effects on inflation you cannot influence others actions," says Prof Basu. Person A might demand an above-inflation pay increase, while person B meekly accepts a pay cut.
"Even if you understand your actions' effects on inflation you cannot influence others actions," says Prof Basu. Person A might demand an above-inflation pay increase, while person B meekly accepts a pay cut.
Even with larger groups, such as unions, they may act in different ways, often cancelling each other out.
Even with larger groups, such as unions, they may act in different ways, often cancelling each other out.
But while there may be some who prefer to think of Brown's appeal in terms of pure take-it-or-leave-it pragmatism, there will always be some who equate it with a question of duty.Send us your comments using the form below.
But while there may be some who prefer to think of Brown's appeal in terms of pure take-it-or-leave-it pragmatism, there will always be some who equate it with a question of duty.Send us your comments using the form below.
