19 February 2009

A while ago I doubted the Tory Party conversion to social democracy.

Then there was a story in the Sunday Mirror last October claiming that “David Cameron would allow minimum wage to die out” (Sunday Mirror 5 October 2008).

Now the other day in the House of Commons a group of eleven Conservative MPs introduced a bill, which won’t get far, to make the mandatory national minimum wage voluntary: adult workers would be able to freely choose to work for less than its current £5.73 an hour (Hansard 10 February 2009 columns 1258-1260: the Employment Opportunities bill). The philosophy behind this was “freedom, flexibility, and opportunity” but I think in practice it will be about working for peanuts.

The argument seems to be that voluntarising the minimum wage would help struggling small firms by enabling them reduce their wage bill and thus keep jobs that otherwise might have to go or even create new jobs and thus help people presently out of work into work by letting them take jobs which firms could afford if they pay less than £5.73 an hour. It is a plausible argument but basically I think this is a reformulation of the original Tory argument that the minimum wage destroys jobs at the bottom and the way to save them is to pay poverty wages. I believe if working for less than the minimum wage is made permissible, it will encourage a rush to the bottom in pay and more and more workers will be asked to choose, a job on inadequate pay or no job? Working for less than the minimum wage will cease to be a voluntary choice for vast numbers in the low-paid jobs. Many wages in Cornwall would be among those reduced to peanuts.

This is not a pay cut in jobs with reasonable pay which I can see in present dire circumstances might be sensible in some firms; it is a pay cut at the very bottom.

Additionally, a cut in low wages will increase the call upon top-up tax credits thus shifting costs from employer to taxpayers generally – assuming the Tories would keep tax credits.

It is instructive to note the position here before the introduction of the minimum wage. Speaking in the House of Commons second reading debate in 1997 on the bill to introduce the minimum wage, Candy Atherton, then an MP for Cornwall, said that in Penryn, Cornwall jobcentre she had seen jobs advertised for care workers at £2.20 an hour; kitchen porters at £2 an hour; and a skilled car mechanic at £1.80 an hour to work “40 hours, weekends and nights” (Hansard 16 December 1997 columns 211-212). She explicitly challenged the idea that low pay brings jobs.

In fact very few jobs have been lost because of the minimum wage which is at a very modest level and is increased annually generally with judiciousness but over time above general price and pay increases. The national minimum wage has increased the real wages of the low paid without damaging employment. For both these points see this study, On the impact of the British national minimum wage on pay and employment, December 2006, by David Metcalf.

Britain’s minimum wage: what impact on pay and jobs is a summary.

The Conservatives voted against the minimum wage when it was introduced by the Labour government. The October story and the Tory sally on 10 February raise the serious question of whether a Conservative government would abolish the mandatory minimum wage or voluntarise it or let it wither and die. The Tory leadership should be open with us about this and the Tory parliamentary candidates in Cornwall should say out loud where they stand.

I think we should keep the mandatory minimum wage and keep on increasing it in normal economic circumstances. If we reach a point where jobs disappear in numbers, we should deal with that scenario then. In the meantime we should take the low paid out of tax. People on the minimum wage pay tax which effectively reduces the wage rate by around £1 an hour. I would like to see the low paid taken out of tax altogether and it is extremely disappointing that after twelve years of a Labour government, with many fat years and millions paid in bonuses to the well paid, working people start paying tax when they reach pay of £116 a week, with no ten percent rate now.

These are not normal economic circumstances. The recession and rising unemployment mean that whether the minimum wage should be frozen at its present level or raised is a difficult question – and wholly separate from the Tory bill. The Low Paid Commission will report in May and its arguments will be engaging.

Look for a moment at the measure of the downturn in Cornwall and the fast disappearance of jobs, the circumstances in which some Tories want to hobble the minimum wage. In January 2009 there were 8989 unemployed people in Cornwall – that is, people claiming job seeker allowance (JSA), the standard measure which probably underestimates unemployment (Table 16 at Claimant count by unitary and local authority). That is a very substantial rise over 2007/08 (see Table 12).

The JSA is not generous. A single person, over twenty five and with no dependent children, gets £60.50 a week on JSA. Rent and mortgage payments are additional but £60.50 is pitifully inadequate for a decent life.

All right, in normal circumstances most people are on JSA for only a few months until they find a job. But these are not normal economic circumstances, are they?

This is the pro-Cornish agenda, recognising the people of Cornwall and their needs. The minimum wage should remain mandatory and be increased if feasible in these circumstances; the Tories are wrong. Unemployment benefits should be increased now: the low level of the JSA which in boom circumstances might have been defended as a temporary payment and a spur to work, an argument I am unhappy with anyway, is not valid now. People will be unemployed for longer than in the recent past and debts and deprivation will pile up and their ownership of their houses is imperilled.

Meanwhile Cornish nationalism studies its navel.

The national minimum wage began in 1999 at £3.60 an hour. About 1.2 million workers were covered by it. There are now about 2 million workers covered by it.

The TUC estimates that 1.5 million workers are currently paid below the minimum wage though not all these will be instances of noncompliance with the law.

The second reading of the minimum wage bill was on 16 December 1997, the third reading on 9 March 1998. Conservatives voted against the bill on both occasions.

The February 2009 JSA claimant figure for Cornwall is 10 220 (added 19 March 2009).

This post, Shameful failure, also discusses inter alia the minimum wage.

Chope’s Employment Opportunities bill was denied a second reading on 16 June 2009 (Hansard column 1106) and is down for second reading on 16 October 2009, along with a host of other bills. Early day motion (EDM) 1461 of 11 May 2009 opposed the bill.