"Wage repression is a fairly self-explanatory term meaning the deliberate undermining of wages by employers. Wage repression is most often used by private sector employers in order to cut their payroll expenditure, but taken as a whole, the state is actually the largest employer, and is just as capable of repressing wages as the private sector.Thomas G. Clark
The idea that economic efficiency can be increased through the repression of wages is an article of faith for ideological neoliberals. Witness the effects of the current Tory austerity programme on wages, or think back to the 1980s when the collective bargaining rights of millions of workers were attacked by Margerat Thatcher’s government.
I say that wage repression is an article of neoliberal faith because (much like a lot of orthodox neoliberal theory) there is actually little actual evidence that wage repression is good for the national economy, and in fact, a lot of evidence that it is actually harmful.
The reason that the subject of wage repression is important now, is that the UK is currently enduring the longest period of wage repression in over a century, in which the average wage has fallen in real terms every single month for three consecutive years (every month since the Tory led government came to power).
The idea that wage repression is actually bad for the economy is hardly a new one. Quakers and other non-conformist religious groups realised early in the industrial revolution that by paying reasonable wages, and providing additional benefits such as education and healthcare, they themselves benefited from the massively increased productivity of a loyal, healthy and educated workforce (as compared to the bitterly exploited, poor, unhealthy, malnourished and ill-educated workforces of the less ethically minded of the early industrial pioneers). Probably the most famous rejection of wage repression was the high pay / low price policy of the American automobile manufacturer Henry Ford (hardly a “leftie” by any stretch of the imagination), who paid high wages and made low profit margins on his vehicles, so that his employees would return their wages back to his business through the purchase of the vehicles they themselves had been constructing.
To put the historic objection to wage repression into reasonably simple economic terms: Wage repression is bad because it reduces the disposable income of workeres - When workers have less money to spend, this results in a fall in consumer spending - When consumer spending falls, aggregate demand falls - When aggregate demand falls the economy falls into low-growth, recession or depression.
I don’t think it takes a lot of brains to realise that the less money the public have in their pockets, the less they are going to spend, and that this fall in spending will have a negative knock-on effect on the wider economy.”