He began by reflecting on the job market.
Many of us vividly remember the recession of the early 1980s, which destroyed so many jobs. There are still communities in our country which have failed to recover from that economic heart-attack. In contrast, the recent recession and the unusually slow recovery from it have been characterised by much better than expected employment outcomes. Instead of losing millions of jobs, we have been adding jobs. Growth in the workforce – in work and looking for work – has been unusually rapid, at almost 1% per year since 2010. This is well above the long run average.
The flexibility of the UK labour market – with workers responding to the downturn by accepting fewer hours and by foregoing wage increases – has certainly helped to protect jobs.
And nothing we do on pay policies should endanger this drive to get people into jobs. But maximising employment isn’t just about maintaining flexible labour markets. It’s also about reforming the welfare system so that it promotes work.
And it’s about going further to support work incentives.
At this year’s Liberal Democrat Autumn Conference we will consider further steps to raise the personal tax allowance, so that eventually people on the minimum wage no longer pay income tax.
He then turned to his own portfolio and claimed that the most important part of the Liberal Democrat and indeed Coalition agenda to get people into employment is our strategy to improve education.
By far the greatest predictor of a good income is a good set of
qualifications. Pay is a function of productivity. And productivity is a function of knowledge and skills. If we want significantly increased pay, we need to increase
He then traced some of the shortfalls in attainment in both primary and secondary schools, and outlines Liberal Democrat achievements, such as extending free early education, and the introduction (and accountability) of the Pupil Premium, before turning to pay policy.
The question arises as to whether there is more that we can do on pay, particularly to help those on the lowest incomes. The context is the introduction by the last government of a Minimum Wage, that has by general consent been far less damaging to employment than many people predicted.
He next asked whether we could we go further and introduce what some people have described as a “Living Wage”?
But personally I see a case for making the issue of poverty pay a much higher profile issue for employers, in both the private and public sector. The minimum wage is not very much, and speaking personally I would want my employees to earn more than this.
I am interested in how we use greater transparency to incentivise behaviours which would not only lead to a society of reduced inequality but which would also save the taxpayer some of the considerable amounts of money currently spent subsidising lower pay.
You can download the full speech here.
* Mary Reid is the Tuesday Editor on Lib Dem Voice.