The Precariat Grows and Stirs

The ranks of the precariat were swollen by the shock of 2008, both directly and as a result of policies adopted by governments in its aftermath. The precariat is a class-in-the-making and is a threat to the established order in ways that mainstream public opinion has yet to appreciate. The precariat must be understood as part of the global class structure that has been taking shape since the onset of globalization in the early 1980s. That structure is unlike what predominated in the industrial era of closed economies.

At the top, there is a tiny plutocracy, with their billions and vast power, a tiny number of global citizens, who have manipulated politicians and much of the media. Below them is an elite of very wealthy people, some aspiring to reach the plutocracy. A long way below them in terms of incomes is the salariat, those with employment security, good salaries and an array of non-wage enterprise-based benefits. The number in the salariat is probably shrinking, but they feel detached from the old welfare state. Alongside them in terms of incomes is a group best described as proficians—part professional, part technicians— living on their wits, not wanting employment security, with portable skills, making good money but in danger of burn out.

Below those high-income groups is the proletariat, the oldcore working class. The number in that category has been shrinking for decades, and many people in jobs that put them in it have found that their jobs have disappeared or have taken on the character of what the precariat beneath them find typical of their lot. We must not forget that European welfare states and its social model was built by and for that class. Yet today they are a fading minority.

It is the precariat that has been growing for the past three decades. It is not an underclass, although that exists beneath it as an unsavory zone of lost souls, in chronic unemployment, detached from society, mostly homeless, suffering from social illnesses such as alcoholism and drug addiction.

Unlike that lumpenized stratum, the precariat has been wanted by the new productive system. It began to grow when economic liberalization took off after 1980, and when governments of left and right pursued policies of labor market flexibility. With a globalizing labor market, firms and governments wanted workers who were flexible and adaptable. But as more people were put in insecure forms of labor, a threat hung over the early part of the Global Transformation.

A globalizing economy with open labor markets meant that what should be called a Global Convergence was initiated, with wages tending towards global equalization. Governments in Europe or other OECD countries could not allow wages and worker benefits to plunge towards levels prevailing in China and other emerging market economies, where in the 1990s they were about one-fiftieth of what a median wage earner in Europe was receiving.

Consequently, as real wages at the lower end of labor markets declined in the OECD, governments made a Faustian Bargain, disguising declining earnings by providing cheap consumer credit, labor subsidies and the new tool of the age, tax credits, which were a subsidy to low wages. The US Earned Income Tax Credit became the world’s biggest welfare scheme, and countries such as Britain followed suit with an array of tax credits that soon grew to dwarf their other welfare programs.

The Faustian Bargain ushered in an orgy of consumption and growth of three forms of indebtedness, corporate, government and household. It was folly. And as with all Faustian Bargains, it had to end, as it did with the crash of 2007–2008.

We must appreciate what had happened in the interim. The precariat had taken shape, encompassing many millions of people globally. It is defined not solely by having insecure labor, being in and out of short-term jobs, with volatile incomes. The precariat is faced by chronic uncertainty, having no occupational career or identity to give their lives.

Above all, those in the precariat are increasingly supplicants. They are denizens, not citizens, in lacking the range of rights regarded as normal by the salariat or old working class. For instance, if you are in the precariat, particularly but not only if you are a migrant, you will find you can suddenly be denied social benefits by arbitrary decisions of local bureaucracies. They do not have assured state benefits. For instance, only a small minority have entitlement to unemployment insurance benefits. They do not have access to paid medical leave or paid holidays, let alone the assurance of an occupational pension to offer hope for a secure future.

A feature of the precariat is that those inside it do not have access to insurance-based social security. This was bound to happen, since the social and national insurance base of the Beveridge and Bismarckian variants of the welfare state was eroded by the shift from labor forces consisting largely of employees in stable full-time jobs to workforces consisting of more and more casuals, part-timers and contract labor. Those in such situations cannot build up an adequate contributory base. Governments have turned to meanstested social assistance that automatically puts the precariat in poverty traps, i.e., where going from benefits to low-wage jobs imply an effective marginal tax rate of 80 % or more.

Up to 2008, the insecure incomes and lives of the precariat were concealed to some extent by the frothy economy. After the shock, there was a sucking sound as millions more were plunged into it, and the insecurities were intensified. But it was not just the Great Recession that enlarged it. The policies that governments and the international financial agencies instituted automatically expanded the precariat and made conditions much worse.

The austerity era has allowed governments to take a more utilitarian approach, and in doing so they have increased structural inequalities that are greater than revealed by measures of income inequality. For instance, the inequality of security has rarely been greater than it is today. Security is a vital part of income and living. But, for instance, when the crash hit, governments bailed out banks and provided more subsidies to the financial elite, giving them enhanced security. Bonuses were restored. Those living with share incomes were aided by quantitative easing. Stock markets have done remarkably well. Meanwhile, state benefits and public social services have been slashed, with benefit levels being eroded and benefits made much harder to obtain and retain. Conditionalities for benefits have been tightened. Poverty traps are worse. While someone in the precariat faces marginal tax rates of over 80 %, governments have cut standard income tax rates to something close to 40 % (with tax reliefs to add) and corporation or capital tax towards 20 % (with even more tax reliefs).

Increasingly, the lower rungs of the precariat have had to rely on charity rather than on rightsbased social protection. The young inside the precariat—and we are talking about a majority of the youth of many countries—have had to rely on informal protection from family, friends and support networks. Most have been unable to rely on much, and have been plunged into chronic indebtedness. Payday loan sharks are an ugly feature of financial rent seeking. The precariat faces decades of debt without realistic chance of escape.

The social picture looks gloomy. But it is just the beginning. The precariat is the new dangerous class because its modus vivendi means its members are detached from all the old mainstream political agendas. That is why, despite the horrors of the crises, they have not mobilized to support social democrats, whose prescriptions of “jobs, jobs, jobs” and the trappings of laborism seems neither attractive nor realistic. A piece of graffiti on a wall in Madrid was wonderfully subversive: “The worst thing would be to return to the old normal.”

Part of the precariat is drawn by the populist far right. This is a minority, and is linked to the demise of the old working class. Part of the precariat does consist of young and old in working-class communities who no longer have working-class occupations. They can be lured to see others in the precariat, particularly migrants and minorities, as the cause of their plight.

The utilitarian politics of commodified politicians also sounds attractive to them. In the UK, for instance, the manipulation of public opinion has been frightening. When we know that high unemployment is due to economic mismanagement and the global economic crisis, a majority has been persuaded by political rhetoric to think that most of the unemployed are that way due to their own fault, and that benefits should be cut, when they are much lower than they used to be.

All the official and unofficial data show benefit fraud to be minimal, but media manipulation and political assertions have managed to have the precariat demonized. More and more tests are devised, more and more sanctions are applied, hitting minorities, the disabled and the young particularly hard.

Migrants and minorities make up a second block in the precariat. They are not drawn to neo-fascism but tend to follow political leads, occasionally participating in days of rage when particularly egregious policies are launched.

However, it is the third and rapidly growing part that is the biggest long-term danger to the political establishments, and where all progressives should pin their hopes. It consists of the young educated, and some not so young, who are experiencing intense status frustration, knowing their educational qualifications exceed the sort of labor they can anticipate obtaining and knowing that there is a deep corruption in the politics around them.

They regard neo-fascism as ridiculous and evil. In the outpourings of 2011, they found a voice, as primitive rebels, in the sense that they combined in the squares and streets, knowing what they were against, but unable as yet to define what it is they wanted instead. The primitive rebels phase is a necessary one in the formulation of an alternative political agenda. It establishes an identity, a sense of pride, a movement from one of self-pity and defeat to one of dignity and renewed struggle.

In meetings of the Occupy Movement and in meetings of the indignados and other groups across Europe, I have found many people able to stand up and say with defiance, “I am in the precariat!” When you can do that, you begin to have agency, an inkling of social power. Defiance is growing, anger is building, and as they do, so patience with the inegalitarian nature of the austerity era will wear thin.