Opinion: will the Minimum Wage have to be reduced or dispensed with?

Although it must be hoped the Coalition is successful in reducing the nation’s deficit through savings and is able to increase economic activity to provide increased tax income, the unexpectedly high borrowing last month does not stimulate confidence.

There is no doubt the Coalition is creating an environment more conducive to business activity and small businesses, which require little finance, will find niches in the market to be able to flourish. However, with the banks still reluctant to lend and the giant corporations having grabbed so many of the business opportunities – it will be only the most inventive and determined who will be able to break into this fierce marketplace.

It is the ever freer global market which has created this fierceness of competition with the global corporations able to seek out the cheapest labour costs virtually anywhere in the world. In previous times there were goods marked ‘made in Hong Kong’ which, generally, indicated that the item was made shoddily. With China, in particular, opening up its massive labour market goods produced in the Far East no longer indicate poor quality – more often quite the reverse.

Given that this labour market, which now also includes India, will become increasingly active over time, it is difficult to imagine how the British workers who are most comfortable engaged in manual work will be able to find gainful employment within the parameters of the minimum wage. To compound matters, since the ratification of the Lisbon Treaty, we have also seen an increase in UK based companies moving their production sites to Eastern Europe to take advantage of cheaper labour costs – the minimum wage also contributes to this shift.

We must presume the Coalition’s plan is that the improved business environment will generate greater global opportunities for companies based in the UK. This should, in turn, lead to increased earnings for the UK based non manual workers of these companies and their shareholders, which will then, in turn, provide greater business opportunities for service companies [those services which can be provided only in the UK] which will again, in turn, generate jobs for manual workers.

Given that cheap labour will be available somewhere in the world for many years to come, without dispensing with or lowering the minimum wage – it is difficult to see how else those most suited to manual work will be anywhere close to fully employed for many years ahead.

From a global standpoint, a system which provides the poorest in the world with opportunities to obtain work, leading to their circumstances being improved, must be seen as a step forward. Previously it was believed that this process would raise the earnings of the most deprived, globally, to close to that of the highest paid. But as the laws of demand and supply in a free market dictate, should there be an excess of labour those paid the highest will have to reduce their rates if they wish to be employed.

So should the recovery not be as successful as hoped, or even if more successful, there is a distinct possibility that those most suited to manual labour will be severely underemployed. Should the recovery be less successful than hoped or the recovery stalls, would the best solution be to reduce or dispense with the minimum wage? If the recovery is more successful, would it be better for the Government to pay employers a premium to employ UK workers? This could be preferable to the Gordon Brown solution of having masses paid unemployment benefit or disability allowance – if it can be afforded!

From a personal standpoint, I seriously doubt if there are many who can really feel a sense of inner worth and/or feel included in society, if they are not, at least, contributing to their own upkeep.

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64 Comments

  • Mike (Labour) 2nd Oct '10 - 2:35pm

    Not it won’t. Do you *want* to reduce it or dispense with it is the question.

  • Mike (Labour) 2nd Oct '10 - 2:35pm

    *No it won’t, that should read.

  • Well I have finally seen it all. A LDV article calling for the abolition of the minimum wage. The LibDem mask of fairness has fully slipped. Yeah, let’s go back to the days of the truly nasty, Tory party, when some employers would pay as little as £1.00p/h or less. If this type of blue sky thinking that is taking place among LibDems in government, then we will be needing more than just God’s help.

  • david thorpe 2nd Oct '10 - 2:41pm

    It would be an economic disaster to scrap it, the minimum wage keeps unemployment down, and also ensures that those in an economy with the highest marginal propensity to consume have more spending power, generating reevenue across the economy

  • The Lisbon Treaty was ratified in November 2009. Has there really been an increase in moves to eastern Europe from the UK in the last ten months? Compared to when?

  • No way should the minimum wage be scrapped. It is minimum. And you can always – if need be – advocate more part time working instead if you need to.

  • Can we have a new BOTY for Silliest Article on LDV?

    Even if we scrapped the MW we couldn’t compete with China & India on low wages. And in any case there are plenty of big companies who will commit to manufacturing in the UK even if if costs more in wages as there are other issues that concern them more (see this speech in Parliament http://tinyurl.com/24yg9fz )

    As we’ve just seen a Ed Davey* announce an increase in the MW it seems silly to suggest we might scrap it.

    * He also announced a reduction in the adult threshold rate from 22 to 21 which is going part way to implementing party policy of an equal minimum wage rate for all adults. I proposed keeping this policy as LDYS chair in 1999, ironically the the main speech against given on behalf of the FPC was by… Ed Davey

  • Paul McKeown 2nd Oct '10 - 3:01pm

    Given that it is almost impossible for anyone to actually live on the minimum wage in this country, the idea that people could be paid less than that is tantamount to slavery. There is a strong argument to be made for increasing the minimum wage so that it is a truly “living” wage. The only real arguments supporting removing the minimum wage are fundamentalist libertarian and fundamentally stupid. Any such move would be opposed by a huge majority of the British public.

  • Colin Green 2nd Oct '10 - 3:02pm

    No. Absolutely not. The collapse of the banking sector and the ensuing recession was not caused by the minimum wage or by the people who earn it. Punishing the poorest workers in society will not fix the banking sector nor the economy at large. Industries who employ large numbers on the minimum wage will not fix our economic problems either, no matter how much more profit they make by paying pittance wages to their staff.

    The Tories shouted doom and gloom over the introduction of the minimum wage. They predicted millions of job losses and the end of the world as we knew it. They were wrong. Some of them, it seems, still oppose the minimum wage. I can only assume that their focus is on the money a company turns over, not the lives of those people who have to live on the lowest wages.

    I personally believe that someone who works full time should be able to afford an acceptable minimum standard of living. If you need a job doing and you want to employ a person to do it, you should pay that person enough to live on and bring up their children. Your company is not the most important thing, the work done is not the most important thing. Basic respect for human dignity is the important factor here. Value the person for working as well work being done. The pay should be the higher of the two.

    So no. If the financial crisis cannot be solved by the current austerity measures, go after the ones who caused it first, then those who are able to afford it next. Those who earn the least in society should attract the least of your attention.

  • Forlornehope 2nd Oct '10 - 3:02pm

    Look at successful UK technology companies like ARM holdings, Dyson, McClaren, Prodrive to name but a few. All of them have opted out of manufacturing, either altogether or in the UK. There are plenty of jobs in this model for well qualified engineers and highly skilled technicians but few for semi or unskilled manual workers. Even Hornby now make their train sets in China.

  • Richard Hill 2nd Oct '10 - 3:04pm

    Prehaps the minimum way is not the best way. Maybe making sure people are better of in work than just on benifit alone is more sensible. Take home money is what matters really. Feeling like a part of society is important. Working not only makes a person money, it also gets people out meeting people, learning new things, do things they would not normally do and just generally adding to their variety life. Most people like to work, otherwise they become like fruit rotting on the vine.

  • George W Potter 2nd Oct '10 - 3:04pm

    The minimum wage is, if anything, too low. We will never be able to compete with the far easy when it comes to manufacturing. Instead we should invest money in training people for more technical occupations and in creating new high tech industries to employ them. Scrapping the minimum wage and lowering our living standards to try and compete with industrial giants like China would be insanity.

  • well good luck with that…

  • Mike (Labour) 2nd Oct '10 - 3:16pm

    It wasn’t just the Tories that shouted doom and gloom about the NMW…

  • What is fascinating about the response to this article is the total unwillingness of people to engage it on economic terms.
    The more expensive and rigid labour markets are then the higher the unemployment (everything else being equal).

    The question the article asks which is will the jobs for unskilled and manual workers come from, which seems an excellent one to ask. Not sure petsona
    Not sure the minimum wage will make a huge difference to it personally, it doesn’t seem to have much effect when it came in.
    What is odd about the UK labour markets is that it combines persistently high unemployment with immigration of job seekers from eastern Europe, which is odd.

    I wonder if the statement that ‘banks are still reluctant to lend’ is true? Is there actually any evidence of this?

  • Andrew Suffield 2nd Oct '10 - 3:19pm

    A LDV article calling for the abolition of the minimum wage. The LibDem mask of fairness has fully slipped.

    I hate to break it to you, but LDV articles are written by everybody, not just Lib Dems; we get articles from Labour and Tory supporters on a semi-regular basis, when they have something relevant to say. And it’s quite rare for articles here to be written by anybody who has any significant level of influence on Lib Dem policy (although we do get some of those too).

  • @Mike (Labour): are you about to regurgitate the Labour campaign manual bollox about the Lib Dems opposing a minimum wage? I hope not, because history records that a minimum wage became official Lib Dem policy before is became Labour Party policy. The only difference was that the Lib Dem policy was for a regional minimum wage…which the Labour Party also now supports because it wants a higher minimum wage in London.

    Re: the original post, a rise in the minimum wage has just been announced, and rightly so. The post is nonsense and no one is talking about cutting the wage. Stop feeding the Labour trolls.

  • Well, the minimum wage is there as a means to an end – to ensure that everyone working a full-time job earns at least enough to get by on (actually calculated to be around £14K – so above the current minimum wage) – not as an end, in and of itself.

    As a society – and as a liberal democrat party – I’m sure the question is not ‘should we reduce the minimum wage and do nothing else, forcing the lowest paid into wage slavery?’ but rather, ‘are there better ways of ensuring people earn enough to get by on?’

    To me, answering that question breaks down quite simply. Assuming someone’s in a full time job, and we want them to earn at least enough to get by on, we can either force employers to pay a certain minimum wage directly(ish) to the employee, or we can tax employers and individuals to top up the employee’s wages after the fact.

    The former destroys some jobs in Britain (and those unemployed will then need to be supported by taxes, assuming another job can’t be found), while the latter might destroy some jobs abroad, with the jobs kept in Britain as a result being supported by taxes. Both provide the employed with ‘enough to get by’, but the costs are borne in different areas, and number employed and distribution of jobs available look a bit different under either approach.

    So which is better? Personally, I favour the minimum wage. If a job can’t be done profitably in the UK, it’s better for it to move abroad. If employers can still afford to pay the minimum wage for the job, then that’s fine – and we’ve probably helped some member of society or another avoid being underpaid.

    The people who were doing the jobs that were lost then have to be supported by taxes, of course – but in the alternative scenario, we’d be supporting these people (who would be employed still), as well as everyone else in the jobs that were profitable enough for the employer to support the minimum wage, but had managed to avoid it through under-paying his workers. So the welfare bill is a bit higher, but the tax bill is a bit lower.

    Of course, once someone’s unemployed, they can look for a different job. They can be trained up to do a job that doesn’t require a subsidy to be profitable.

    If someone’s doing a job that’s being subsidised to be worth doing, they’re working full-time anyway, so don’t have as time to look for alternative employment, or be trained up for a job that requires subsidy. So it’s hard to see a way in which the cost of those jobs will ever go down, whereas it’s entirely plausible to see the welfare bill go down if and when people find alternative jobs.

  • paul barker 2nd Oct '10 - 3:42pm

    A Can I just point out the word OPINION at the top of the article. This peice is just the first step if the writer seriously wants to change LD policy .
    B The peice makes the typical assumption that Manual = Unskilled. In fact the variation in skill levels among manual workers is as great as among workers with keyboards, musicians & artists are also manual workers.

  • Norfolk Boy 2nd Oct '10 - 3:43pm

    No, it certainly should not be scrapped.

    Perhaps the writer of the article might like to consider taking a pay cut for the greater good?

    Or how about a large increase in the upper tax band to help us out of this problem?

    No, let’s take it from the least well off.

    It’s no wonder you will be written off at the next opportunity people get…

  • Hrm, a few typos in the above – hopefully what I meant was obvious enough.

    One I’d explicitly like to correct is ‘So the welfare bill is a bit higher, but the tax bill is a bit lower’.

    Obviously, welfare is paid for by taxes. What I meant was ‘the cost of subsidising below-enough-to-get-by-on employment, which comes out of the taxes’. D’oh.

    Also, this classification of people ‘most suited to manual work’ makes me blink a bit. I’m most suited to biological work, and indeed spent significant amounts of my own time and money (and the government’s money, of course) becoming so. I’m working in IT instead, because that’s where the jobs were. You have to be flexible in today’s job market, it seems, so just being ‘most suited to manual labour’ is no excuse for not taking a job in an alternative position, should the opportunity present itself and you’re not hurting your earnings by taking it.

    That’s assuming the definition is just “anything done primarily with one’s hands”, of course – skilled and unskilled manual work. If it’s weasel words for “those too stupid to do any other job but unskilled manual labour”, then myself and the author are probably not going to see eye to eye on that one… to me, the less of such jobs there are, the better. If we have a large enough pool of people who can do those jobs, and only those jobs, then that’s a failure of our school system (quite a plausible one at that, unfortunately), and we should invest in these people so they can become capable of, at the very least, skilled manual labour, or even (gasp) non-manual work.

  • Surely if you cut the minimum wage,
    a) you’d have to spend more state money on tax credits etc, which already mean the state is subsidising private employers.
    b) how on earth will cutting the minimum wage incentivise people to get off benefits and into paid employment? I’d not want to get out of bed and work long hours for peanuts.

    >What is odd about the UK labour markets is that it combines persistently high unemployment with immigration of job seekers from eastern Europe, which is odd.

    The complaint from British workers here now is that E Europeans have allowed employers to drive wages down to levels they can’t or aren’t prepared to work for.
    Allowing employers to pay even less isn’t going to make that any better.

    >Norfolk Boy >It’s no wonder you will be written off at the next opportunity people get…

    One opinion or suggestion out for discussion does not a party nor a policy make.

  • Roger Roberts 2nd Oct '10 - 4:26pm

    Is John Roffey a Liberal Democrat ? The very suggestion would be a backward step. I don’t know what his wage is but certainly he doesn’t seem to understand that people need and deserve a basic minimum. This weekend two worries re wages 1. We must resist any moves to do away with the Agricultural Wages Board ! 2. Temporary Contracts in the Health Service are causing deep anxiety.

  • @Hywel

    The increase announced by Davey was just the enactment of the previous Labour government’s budget policy. So too the lowering the adult threshold. And also the introduction of an apprentice minimum wage, a recommendation made by the Low Pay Commission, was part of the previous Labour government’s budget policy.

    And it was never LibDem policy to have an equal minimum wage rate for all adults. LibDem policy was, and I presume still is, Regional Minimum Wage. LibDem policy has never been fully supportive of the National Minimum Wage.

  • matt severn 2nd Oct '10 - 4:40pm

    The minimum wage is the only law Labour ever passed that helped me. It would be completely wrong to scrap it, it owuld only increase wage slavery. I am sure Clegg, Cable and co will never do anything to reduce or scrap it.

  • Colin Green 2nd Oct '10 - 4:48pm

    Nick
    Posted 2nd October 2010 at 3:36 pm | Permalink

    “Well, the minimum wage is there as a means to an end – to ensure that everyone working a full-time job earns at least enough to get by on (actually calculated to be around £14K…

    … Assuming someone’s in a full time job, and we want them to earn at least enough to get by on, we can either force employers to pay a certain minimum wage directly(ish) to the employee, or we can tax employers and individuals to top up the employee’s wages after the fact. ”

    An interesting point of view. With working tax credits, that is in effect what we do today. Boiled down, this could be viewed as state subsidy of industries that are either uncompetitive when paying a decent wage, or are unwilling to pay a decent wage. Are either what we really want? Are either acceptable when viewed like this?

  • There is no doubt the Coalition is creating an environment more conducive to business activity and small businesses, which require little finance, will find niches in the market to be able to flourish

    At that point, I realised we were on to a loser. It is established fact that small businesses require huge amounts of liquid capital which they cannot access still, because of the ongoing credit conditions. This is not to do with large corporations muscling in – and the Coalition has had zero effect on this. To be fair, it hasn’t tried to do anything – but it is still a daily issue causing huge problems.

    We must presume the Coalition’s plan is that the improved business environment will generate greater global opportunities for companies based in the UK

    I love the use of the presumption. Because Gideon himself doesn’t even know. If he can’t stimulate exports – pretty difficult in a country with a low single percentage point manufacturing base – he’s screwed. As are we.

    would the best solution be to reduce or dispense with the minimum wage? If the recovery is more successful, would it be better for the Government to pay employers a premium to employ UK workers?

    Unbelievable. So in a country where the ruling government’s economic policy is to make millions unemployed – we make the lot of those on the lowest earnings even worse, by reducing their incomes to levels not seen since the mid-90’s – and then double their pain by removing the welfare safety net for those at the bottom end who’s wages will become so low that it is unaffordable to work?

    And you seriously expect this Government, full of Neo-Thatcherites to subsidise companies to employ people?

    You really do not get what Cameron, Clegg + Osborne’s plan is do you?

  • Mike(the Labour one) 2nd Oct '10 - 4:56pm

    @MBoy: The National Minimum Wage was opposed by the Lib Dems. I’ve had this conversation before- the Lib Dems variously support a regionally variable minimum wage, and a body of arbitration to set different minimum wages for different industries, but not a national minimum wage.

    The Lib Dems thought the NMW would “set a dangerous precedent”. If you want to waste time you can dig through their manifestos and look for a pledge to introduce the NMW, but you won’t find it because it’s not there.

  • Like almost everyone else who has commented I think this idea is cobblers. But I was interested in George Kendall’s report of what Andrew Dilnot had said because for 25 years I ’employed’ someone as a cleaner who for multiple reasons would not have found work anywhere else. I paid him cash, and in truth it probably was at about the level of the national minimum wage given how long he spent doing the job, but it was less about the remuneration than about the fact that it gave him the dignity of doing something useful in a society where people like him no longer have a productive place.

  • Colin – I must admit to not knowing a great deal about tax credits, mainly because I’ve never been eligible for any of them! When I do think about them at all, I view them as a way of varying the minimum wage according to individual conditions… since saying to an employer, ‘you must pay at least £5.93 for a single male, but at least £6.50 (say) for a single mother with a child, but you can’t discriminate on that basis’ is nothing short of schizophrenic.

    Again, it’s all about the mechanisms, while all parties seem vaguely in agreement about the principle – people should have enough to live on – which I think is a great thing.

    i’m interestedly watching IDS’s welfare reform proposals, and hoping that they’re sensible – since the damage that a minimum wage that destroys the lowest-paid jobs does can only be mitigated by a concerted effort to get the unemployed back into productive work, and doing that depends very much on the welfare state.

    Replacing A4e and connexions with institutions that actually do the job properly, and stop stigmatizing the long-term out-of-work. Give them enough money to get by on as unemployed people (significantly below the NMW), educate them and support them in finding jobs. Most people want to work, scare stories aside. Those that don’t aren’t numerous enough to pay huge amounts of attention to.

  • I don’t think that there is any doubt that the NMW does price some people out of work (as Andrew Dilnot pointed out), but the estimated number is very low. Politically it will not be abolished, however.

    The article is fairly silly, nonetheless – as someone has already pointed out, we don’t compete with China now, and will not in my lifetime.

  • Anthony Aloysius St 2nd Oct '10 - 7:36pm

    It’s great that we can look forward to economically damaging socialist measures like the minimum wage being abolished.

    Also high on the list should be the 1788 Act for the Better Regulation of Chimney Sweepers and their Apprentices. Why should children under eight be denied the opportunity of a lucrative and fulfilling career in environmental cleansing?

  • John Roffey 2nd Oct '10 - 7:37pm

    Just to clear up a few matters, I am a returning Lib Dem – I returned before the GE because I wanted to help the local party, in some way, during the election campaign.

    I am a supporter of the minimum wage and will be very sorry if it goes any way but up.

    The last sentence is the main point of the article. ‘From a personal standpoint, I seriously doubt if there are many who can really feel a sense of inner worth and/or feel included in society, if they are not, at least, contributing to their own upkeep’. Those employed can feel redeemed if those who are unemployed receive a decent income during such a time, however, I believe, this is very much a second best for those who are unemployed for a long time or indefinitely.

    Although I accept that today this is not an issue, however, the next few years will determine if our economy is to recover sufficiently so that peoples life styles do not have to change markedly from what they have become used to. Reading between the lines, although the ‘experts’ are trying to keep confidence high – I believe the expectation sides with continued decline in the face of fierce global competition. I also would like to see Lib/Dem members be involved in policy development when the coalition ends – this requires facing hard choices.

    If there are to be increased levels of long-term unemployment [this not fanciful] – would it be better to find a way that those effected could compete with, at least, the Eastern European workforce rather than be unemployed? We know that the structure of the global economy does help the largest corporations [Kraft/Cadbury] and the likelihood of more ‘British’ companies being taken over by these global giants does increase and whereas a ‘British’ company are likely to try to keep manufacturing within the UK – a global giant will have no such preference.

  • It’s ridiculous to even think about scrapping the minimum wage! In london, you can’t even survive on it without state help (I make significantly above and barely can), so all you’d do is hugely increase the welfare bill.
    unless you’re willing to have a LOT more homeless people!

  • @Mike(the Labour one): Sorry pal, you really need to stop believing the garbage propaganda the Labour party produces on the history of the minimum wage. Dont go trying to pretend that the Lib Dems “oppose” the minimum wage because they wanted it set regionally rather than nationally. If you want to be a credible debater here instead of just another Labour troll you’ll have to do better than that.

    Labour committed to a national minimum wage in 1995. They now support a regional minimum wage because they want a higher value for London, which is exactly what a regional minimum wage was meant to allow. The Lib Dems adopted a regional minimum wage in 1994, and here is reporting of the event:
    http://www.independent.co.uk/news/uk/the-liberal-democrat-conference-minimum-wage-vote-another-blow-for-ashdown-delegates-rebel-with-lowpay-safeguard-but-fall-into-line-for-vote-on-the-monarchy-1450092.html

    Wake up and smell the coffee, sunshine. The idea that the Lib Dems oppose the minimum wage is just more Labour lies.

  • SandraF has made the very valid point that not having a minimum wage necessarily means state-subsidised cheap labour. Is that what free-market “libertarians” want? The public purse footing the bill for the externalities generated by greedy and unscrupulous employers? The economic right do love to have their cake and eat it.

  • Very silly article – lets take it off before it appears in Labour Leaflets.

  • John Roffey 2nd Oct '10 - 9:12pm

    @ Mouse: Could you elaborate please.

    @ SandraF and Sesenco: As I have said – I am for a minimum wage, however, if this should be the cause of jobs going to, say, Poland because the wage level is lower and employment does, as expected, rise once the austerity measures begin to bite – wouldn’t it be better to use the unemployment benefit as some form of welfare benefit which allows a lower minimum wage – rather than jobs going to Poland and many Brits left to long-term unemployment?

  • Sorry, but you should have done a lot more homework before posting this – there is more to employment costs than just wage rates. It seems to come across as kite flying to create angst.

    “more conducive to business activity and small businesses, which require little finance”

    To general – some may little finance but others may need lots.

    “banks still reluctant to lend”
    Banks were put in the position of having to increase their holdings. We are in the situation where both the previous and current Govs are keeping interest low and lending banks our money, however the banks are lending at much higher rates so we are the cash cows having to pay over the odds for our own money. Unless this situation is relaxed so that they can lend more the situation won’t change.

    “global corporations able to seek out the cheapest labour costs ”
    As mentioned above, MW is only one element of labour costs. Companies assess the whole package (e.g. regulation, energy costs and so forth. If it was purely down to wages we wouldn’t have slipped below other European nations in the global competitive lists over the last 10 years, as they would be in the same boat as us.

    “goods produced in the Far East no longer indicate poor quality ”
    Generalising – I believe Japan is in the Far East, it stopped producing shoddy goods many moons ago. China has a mixed reputation at the moment, it’s to early to say if it turns into another Japan.

    “comfortable engaged in manual work will be able to find gainful employment within the parameters of the minimum wage”

    Why? Are we going to empty our own bins? Sweep our own roads? Push our own hospital trolleys? The list goes on – people will be required for all sorts of manual jobs regardless of MW.

    “since the ratification of the Lisbon Treaty, we have also seen an increase in UK based companies moving their production sites to Eastern Europe ”

    As much as I may think Lisbon was political betrayal/cowardice, I think I need to say “Piffle”. That was happening before Lisbon – because labour force costs were cheaper in places like Poland.

    “those paid the highest will have to reduce their rates if they wish to be employed.”

    Those in the private sector have been experiencing this for sometime – not really sure what this paragraph has to do with the MW wage though?

    “…would it be better for the Government to pay employers a premium to employ UK workers…”

    So someone works an 8 hour day getting circa pound 50 PD, a Company goes to the Gov and says I can get this done in X for a dollar a day, pay me 49.40 Per Day for each person or I’ll move there? It’s not a very bright idea really, the tax payer becomes a hostage to fortune (or a hostage to the misfortune of those working in the latest country to allow sweat shops).

    I think you need to go away and do some proper research on why companies have been leaving over the last few years, once you’ve found out what the real issues are then you can start putting forward proper ideas, instead of simplistic notions that reducing/removing the MW will some how solve all our ills.

  • David Allen 2nd Oct '10 - 11:45pm

    Chris_sh:

    ““…would it be better for the Government to pay employers a premium to employ UK workers…”

    So someone works an 8 hour day getting circa pound 50 PD, a Company goes to the Gov and says I can get this done in X for a dollar a day, pay me 49.40 Per Day for each person or I’ll move there? It’s not a very bright idea really, the tax payer becomes a hostage to fortune (or a hostage to the misfortune of those working in the latest country to allow sweat shops).”

    Seems a very valid point. Now, this plan of Duncan Smith, to pay benefits to those in low paid work. Won’t it naturally encourage employers to cut their wage rates back to the minimum, thereby making the State subsidise their production?

    And when neither the cuts nor the benefits revolution brings the desired upsurge in private industry and employment, won’t there be pressure to extend the Duncan Smith scheme, by reducing the minimum wage while increasing the State subsidy, in desperate efforts to bring the jobs back home from China?

    If John Roffey’s thinking is flawed, then so is IDS’s, I fear!

  • I know several people that earn above the minimum wage and still have to take on additional jobs to be able to make ends meet.

    The principle of a fair days wage is the difference between a civilised society and slavery of those who for whatever reason are unable to get into the higher paid roles in society.

    Should it ever become Liberal Democrat policy to scrap the minimum wage I would of course look at the proposed changes and see if it still ensured that people were paid reasonably but it would be very unlikely that I would vote in favour of the scrapping of the minimum wage and itcould w be a deciding factor on what party to support in future elections.

    However as it as not been proposed a party policy I have no intentionof changing my arty and will continue to work within the Liberal Democrats to try and create a society that empowers the individual to make choices about how they live their own lives

  • Martin Land 3rd Oct '10 - 9:59am

    Great. Another Lib Dem putting a nail in my membership card….

  • @David Allen
    “Seems a very valid point. Now, this plan of Duncan Smith, to pay benefits to those in low paid work. Won’t it naturally encourage employers to cut their wage rates back to the minimum, thereby making the State subsidise their production? ”

    Well, the MW has been around for quite a while and no doubt some sectors have taken advantage of it to underpay staff (e.g. care sector – which I know quite a bit about as both my wife and sister work for care providers). However, this has been going on for ever and we have already been subsidising these people over the period of MW with the various schemes brought in.

    “And when neither the cuts nor the benefits revolution brings the desired upsurge in private industry and employment, won’t there be pressure to extend the Duncan Smith scheme, by reducing the minimum wage while increasing the State subsidy, in desperate efforts to bring the jobs back home from China?”

    As I pointed out, the MW is not usually the only driver for large companies moving to low paid areas, there are all sorts of issues that effect the overall workforce cost (e.g. the workforce cost can be increased when companies have to employ legions of lawyers, accountants and H&S specialists to interpret the mountains of regulation spurted out by government). A lot of jobs that have gone so far have actually been high value ones e.g. outsourcing IT services to India, where the staff in this Country wouldn’t have been able to claim benefits anyway. I would class this move from the Gov as an attempt to simplify/stream line the system so that these sort of people are able to be flexible in the type of work they take.

    “If John Roffey’s thinking is flawed, then so is IDS’s, I fear!”

    It depends on if whether you believe this is some attempt to lure jobs back or if it is to provide an incentive for flexibility in the workforce. I don’t think I’ve heard anything so far that suggests it is to do with the former, but all to do with the latter. You’ll only sort out the former when everyone sits down to work out why we have been falling down in the competitive stakes, when we are competitive as a Nation we will be able to attract companies back.

  • John Roffey 3rd Oct '10 - 10:24am

    @ Chris_sh: I rather wonder why you are arguing against the notion that by having a minimum wage jobs are likely to be transferred to nations where the average wage rates are lower. In an article such as this broad generalities are required – with so many factors impinging on the matter to give chapter and verse on each would make for a far too unwieldy piece.

    I had hoped that this issue would open up the complexities for a national government trying to manage the economy within a significantly changing environment. 30 years ago, prior to Thatcher, nations could protect their industries along with jobs. Since then we have had the major development of the global freemarket and the Lisbon Treaty, which consisted of the missing parts of the European Constitution previously rejected by the French and the Dutch, and was clearly aimed at creating an unrestricted single market along with turning the nations of the EU into a single entity.

    Since, I believe, it is generally acknowledged that the Party is likely to have some difficulty re-establishing itself as separate entity once the Coalition is ended, by identifying those issues which are likely to be prevalent at that time early, it gives an opportunity for a debate which might identify possible policies that are both appropriate and unique to the Lib/Dems.

    Surely the key issue for the economy at this time is employment or the lack of it. Taken on a global scale, as we now must do, Foxconn, the notorious Taiwanese Co which makes the iPod and iPad [and computers for a number of the leading brands, I believe] is planning to increase its workforce to 1.3m [from 920k] over the next year. Apple/Mac is clearly a US company yet they have these products produced in Taiwan despite the fact that US unemployment rose by 0.1% last month to 9.7% with no obvious signs of improvement.

    http://en.wikipedia.org/wiki/Foxconn

    http://focustaiwan.tw/ShowNews/WebNews_Detail.aspx?ID=201008190012&Type=aECO

    http://www.bloomberg.com/news/2010-10-03/unemployment-in-u-s-probably-rose-as-recovery-can-t-generate-enough-jobs.html

    Is this really flying a kite to create angst, or is not trying to make a realistic assessment of what we are heading into just burying our heads in the sand?

  • I am greatly heartened by the large number of Liberal Democrats on this site who are opposed to the reduction or abandonment of the minimum wage. However, I fear that the idea is being enthusiastically proposed and discussed at the Dept of Work and Pensions already, and, given the Orange Tories’ history of capitulation to Blue Tory policy impositions within the coalition, I have no confidence that the abandonment or reduction of the minimum wage would be opposed by those Orange Tories in the Cabinet. Which makes me so happy that the Labour Party has a leader who is committed to maintaining the minimum wage and improving on it with a Living Wage!

  • John Roffey 3rd Oct '10 - 12:31pm

    @ Mack: Irrespective of whether that policy cause a significant seepage of jobs and unemployment steadily rises?

  • @John Roffey

    “Irrespective of whether that policy cause a significant seepage of jobs and unemployment steadily rises?”

    That was the dire forecast by the Blue Tories when the minimum wage was first put forward as a proposition. But the negative economic consequences forecast by the Blue Tories didn’t materialize. In fact, conversely, the economy benefitted and grew because more people had more money to spend. I believe the same personal and public benefits would result from the introduction of a Living Wage. But it will always be opposed by skinflint employers and supporters of Capital. Those are the people behind Cameron and his big society idea, which is to drive wages down, sack hundreds of thousands of public sector workers, and then force them to do voluntary work to “earn” their benefits. Big society? Big con!

  • @John Roffey

    Hi John, the reason I think it is kite flying is that it only addresses one tiny fraction of what makes a company come/stay here.

    1. Bureaucracy. Until the start of this year I ran my own small company, I finally admitted defeat at the start of the year as I was just fed up to the back teeth with having to deal with the ever increasing reams of paperwork coming from central Gov. I was spending as much time trying to work out how I was supposed to act as I was trying to make money. So the amount of regulation does make a difference, as I mentioned in comments earlier, if companies are having to employ staff just to deal with this flow of differing regulation, then the wage bill will go up even if you employ manual workers on 50p a day.

    So sort out the regulation.

    2. Education. If you don’t provide a well educated workforce then companies will move elsewhere or import workers. Companies (quite rightly) do not think it is their place to teach the basics, they should be in the position of just having to teach what they need their workers do to get the required job done.

    Years ago, the Indian Gov decided that it wanted lots of highly qualified IT people, this resulted in a very cheap IT workforce. This Country carried on with socialist inspired version of what constituted good education, resulting in the cost of the IT work force rising. Companies then sweet talked the Gov into making this one of the areas where they could import cheap labour, which they promptly did. The result was lots of Indians coming over to take over work at a fraction of the cost. Business was happy but it wasn’t good for the long term health of the Country as all of the imported workers will go back home, taking all the experience and knowledge with them.

    So sort out education.

    3. Taxation. I did some work for a large multi national (multi billion turnover) a couple of years back. It decided to create a subsidiary to deal with its product sourcing and moved it to Switzerland, it did that because it was offered good tax breaks and other incentives. The result, not many jobs went there (although they were high value), for the most part they increased their margin for getting the raw materials that they needed and the Swiss got a nice wedge of tax.

    The same can be said of some of the factories it moved to Eastern Europe, it was more to do with tax breaks than wage levels.

    So sort out the tax system.

    4. MW. For the benefit of socialists who read this, I could not describe myself as having a socialist bone in my body, to my mind the practice of socialism always ends in some form of disaster and 13 years of Labour have done nothing to dispel that belief. Having said that, one of the very few things that I can agree with is the minimum wage.

    Now if we reduce/get rid of this wage what would be the consequences? How about these for starters:

    a. Downward pressure on all wage rates, not just the minimum wage.

    b. The downward pressure causes a reduction in tax take from IT/NI/VAT as people are obviously not earning as much (there is only so much tax you can extract from a dollar a day). According to the IFS 2008/9 forecasts (the last forecast I’ve seen) these 3 account for over 50% of tax take (about 60% after taking tax credits into account).

    c. Assuming we’re not in the business of letting people starve, Gov expenditure goes through the roof as more and more people require state assistance to survive (e.g. housing benefit, ever higher tax credits). Because wages are lower, local councils are forced to reduce the amount that they can take from council tax, meaning cut backs in services or even lower wages in the council sector. Alternatively, central gov has to provide more money to local gov.

    d. Government have to find a new source of revenue to offset the loss from personal taxation and to pay for increased benefits/payments to local gov. They can’t take it from individuals so they have to take it from companies.

    e. Companies realise that other parts of the world offer far better tax breaks so move there.

    f. Share prices drop through the floor as more companies move offshore, pension funds start going belly up and the Gov has to increase pension spending as people can’t rely on personal provision.

    g. Gov raises more tax from companies to compensate for the additional money required after f.

    h. More companies move offshore.

    i. Country goes belly up.

    All of the above if why I think you’re being way to simplistic in your arguments, sort out the issues in 1 to 3 above and you probably won’t have to worry to much about number 4. Just concentrating on one little area does nothing to solve the problem.

  • Mike(The Labour one) 3rd Oct '10 - 3:56pm

    @MBoy: You’re talking absolute rot.

    First of all, look back to my comment- it specifically says the “the NMW”. Do you want to try and read my posts all the way through?

    “It wasn’t just the Tories that shouted doom and gloom about the NMW…”

    See the “N”? Want to guess what it stands for?

    And my next post which was in reply to you-

    “The National Minimum Wage was opposed by the Lib Dems. I’ve had this conversation before- the Lib Dems variously support a regionally variable minimum wage, and a body of arbitration to set different minimum wages for different industries, but not a national minimum wage.

    The Lib Dems thought the NMW would “set a dangerous precedent”. If you want to waste time you can dig through their manifestos and look for a pledge to introduce the NMW, but you won’t find it because it’s not there.”

    It’s completely ignorant of you to go off on a rant over something you wrongly assumed I said because you were too lazy to finish the first sentence. Nowhere did I say that the Lib Dems opposed “a” minimum wage, which can mean a variety of things- I said “the NMW”, or “the National Minimum Wage” and I provided a quote to back it up.

    And the Living Wage isn’t the same as the Lib Dems proposals, though I would like a national Living Wage.

    Now for the future, MBoy, if you’re going to attack something you think I’ve said- try and find it first. Make sure you’re able to quote it. Attacking me over what you imagine I’ve said when I am in fact recorded as having said the opposite makes you look ridiculous.

  • @Mike(The Labour one): Sophistry and weasel words. You quite deliberately say “the Lib Dem oppose the national minimum wage” because you know full well most people will interpret that as meaning that the Lib Dems oppose the idea of the minimum wage, knowing all the time that the only difference is that Lib Dems thought in 1994 that allowing regional variation would be a good idea, as indeed Labour now do wrt London wages. This is deliberate deception by you. You are a fraud. Now be a man and admit what you are up to and that you’ve been rumbled.

  • Mike(The Labour one) 3rd Oct '10 - 6:13pm

    @MBoy: Again, you’re talking nonsense.

    How much clearer can I be than to say- “the Lib Dems variously support a regionally variable minimum wage, and a body of arbitration to set different minimum wages for different industries, but not a national minimum wage”

    The first comment you replied to was simply this-

    “It wasn’t just the Tories that shouted doom and gloom about the NMW…”

    What is incorrect about that? The Lib Dems described it as “dangerous”. They thought the national minimum wage was distinct enough from their proposals that it was worth opposing in such strong terms, it’s dishonest to try and reqrite history and claim the minimum wage for your own after opposing it.

    And as I’ve said- the living wage for London isn’t the same as the Lib Dem proposals for regionally-variable minimum wages were at all.

  • well there will be lots to tell the workers in the coming elections

  • David Allen 3rd Oct '10 - 11:03pm

    Chris_sh

    I think we’re a bit at cross-purposes. I agree with your comments in favour of the minimum wage. In fact, I’m offering additional reasons as to why it is a good thing.

    On IDS’s plan to pay benefits to those in work, you say the aim is “to provide an incentive for flexibility in the workforce.” Yes, but it could also have unintended consequences. The employer who pays £8 per hour does so because he can’t get the staff for £7, and he can get the staff without paying £9. So when IDS comes along and offers £1 in benefits, it won’t take long before said employer realises he can now get away with paying £7. End result, the state wastes its money subsidising the employer.

    Or perhaps not. Perhaps the employer survives in business against German competition because that cost saving makes his product cost-competitive. Cue pressure from the German manufacturer on the German government to provide a similar level of state subsidy for employment. Cue a beggar-my-neighbour protectionist competition across the West.

    IDS’s plan isn’t designed as a protectionist measure, but it could easily morph into one. The minimum wage may act to reduce that risk. It may not do so sufficiently.

  • @ David Allen & Jock
    Whilst I may sympathise with some parts of your posts, I would have to say that we are in a big hole and we need to stop digging. In this particular case, the hole is our debt – which is projected to rise for the foreseeable future.

    If Germany decides to run a protectionist policy then in reality there isn’t to much we can do except complain. They seem to be in a far better place than us, I think the last set of figures I’ve seen indicated that their net debt/GDP ratio will be 10% below our own in about 2015 (i.e. they have greater financial leeway than us). Of course those figure do not include the small issues of the public sector pension liability and PFI, with some economists believing that we are already running at a Net Debt/GDP ratio of 103% (that statement is tempered by the fact that economists seem to have problems agreeing with each other). Also, as Germany is one of a small group of nations that seem to be bankrolling the Euro at the moment, I can’t imagine to many Eurocrats are going to risk upsetting them in case they take their ball home.

    Regarding the IDS plan, I don’t think it will become a protectionist measure in the near future simply because of the amount of time that will be involved in rolling out the plan. Of course, everything is guess work at the moment as I’ve not read the “plan”, but I would think that it will start initially with the unemployed. Now if an employer wants to bring on staff at £7 instead of £8, then that becomes part of the normal market economy – if they want to reduce the wages of current staff then they can start negotiating with them, will this cost us anything – the honest answer is I don’t know as I don’t know the details.

    But as I’ve said elsewhere, I think the whole argument about the MW is just to simplistic, most of the people suffering from wage deflation at the moment may not be anywhere near MW. Getting rid of it at this time could cause even greater wage deflation (as there is no minimum marker) which in turn reduces tax revenue, which in turn increases either debt (with the resultant increase in interest payments) or tax on Companies who may then decide to move anyway.

    Also, IMHO, it detracts from proper discussion on how we ended up in the mess and what we can do to avoid it in the future (I think that may be the worry of Jock as well?). I personally have a great problem believing that it is a good idea to go into a recession carrying the same % net debt level as that suffered at the peak of the previous recession. I also think we have allowed ourselves to fall down the list in the global competitive stakes, meaning that a lot of companies wouldn’t bother coming here anyway. Our education system seems to be in a mess. Plus we’ve sold a lot of kids down the drain by implying that they’ll get better wages with a degree, but neglecting to mention that the law of supply and demand means that they will become part of the reason why those wage rates start dropping.

    However, if we are going to subsidise companies, I personally would rather a system of reward rather than succumbing to blackmail. Would it be possible to offer greater tax breaks in the future (e.g. up to 5 years time) for companies that do not cut the workforce (or a scale of reward for percentage of workforce cut)? This would provide some incentive to keep going until times are better, it may reduce the amount we have to pay out now which in turn would reduce the amount we pay in interest, plus it would help with skill retention for when things (hopefully) get better.

    End of very long winded post!!

  • Abolishing the Minimum Wage would be seen as a protectionist measure, which would likely contribrute to the feeling that many countries have that they need to take protectionist measures so we could lose business globally without gaining any rise in low paid employment as China’s quality is very high, and it’s keeping its currency low, so the UK would probably offer little value. Then we have places like Vietnam, Cambodia and Bangladesh that are becoming very competitive quality-wise and are able to undercut China.

    I personally think we should raise the MW to about £7.50 (or whatever a decent standard of living regionally is), and we should do this by working with businesses, probably taxing them less, rather than badmouthing them all the time. There are about 4.5 million businesses in Britain and the vast majority of them are small businesses, so they probably wouldn’t being to afford a rise without being taxed less. This would presumably mean a lower welfare bill so that could hopefully offset the lower tax.

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