29 January 2006

The Minimum Wage and Poverty.

Labour introduced the national minimum wage. I restate this because I want to emphasise just how important an act this was. Economists and the Tories were unified in their condemnation of the irresponsibility of such a policy.
They stated that unemployment would rise (the cheek of the 'everyone on the dole and we don't care - price worth paying etc.' Tories stating this is amazing). Instead unemployment has fallen and employment has risen by 2 million. To claim that this would have been more dramatic without a minimum wage dismisses the benefits of a policy that has increased the wages of 1.3 million people whose lives have been dramatically improved financially. This is no small benefit and will impact positively on society as a whole.

The Tories now accept the minimum wage but continue to argue against increasing it. The Lib Dems were strangely mute in their support for the minimum wage and have since criticised any rise as 'dangerous'. This clearly is a very hostile attitude considering just how low the minimum wage still is. In the South East, even low paid jobs such as care assistants, shop assistants and unskilled factory labourers already pay above the minimum wage.

Labour has increased the minimum wage by 40% since its introduction in 1999 from 3.60 to 5.05, with a further manifesto promise of 5.35 this October, this is faster than the rate of inflation. Bloggers4Labour and Stumbling&Mumbling both seem to advocate the citizen's income as a better alternative to the minimum wage, and in this I totally agree with them, but this does not mean that in the absense of such a citizen's income, we don't need a minimum wage in the meantime.

Stumbling&Mumbling inexplicably argues that any increase in the minimum wage is meaningless to the low paid because of the marginal tax rates they incur. I'm sure those on the minimum wage would disagree. So MR stumbling&mumbling, if someone offered you a 9% wage rise, you would turn it down because some of this rise will be lost in tax? What on Earth are you talking about?

So if at the next election any of you decide you want to see the back of Labour, the first thing you are kissing goodbye to, is any rise in the minimum wage. The Tories and Lib Dems won't dare abolish it, they will just let it erode until it becomes irrelevant, like Thatcher did with the previous minimum wage that she eventually quietly abolished when it became so low it was meaningless.

Polly Toynbee is right to argue (in the absense of a citizen's income) that we should keep increasing the minimum wage until employment stops rising. Then we know that we have reached the minimun wage's limit of effectiveness. My opinion is that especially in the South East, we are a long way away from that figure. Effectively someone on benefit in Brighton needs 6.50 an hour in a 40 hour week to financially match their level of housing/council tax benefit and jobseekers allowance. How can we expect people to accept jobs that are going to make them financially worse off? The minimum wage in this respect is already so low as to be a joke. This is the benefit's trap. The ridiculously complex tax credits system is the inefficent way Gordon Brown is trying to fix the benefits' trap problem, at least he is trying unlike the other parties, but a citizen's income makes far more sense.

I'm sure some of you will now argue that benefits must be too high, but they of course only reflect the high cost of living in the South East. To cut benefits is to refuse to accept that people deserve to have the basics for living. This will only prove counter-productive as people turn to crime to get the basics of life (the Nigerian saying 'when your neighbour is starving your chickens are not safe' is very apt here). We have to accept there will always be some unproductive members of society. Thankfully they are just a small percentage. They must be encouraged to contribute but they cannot be forced without serious detrimental consequences elsewhere that are counterproductive. Most people want to work. The benefits paid out are only enough to cover the high rents and living costs with no room for anything else. This is how it should be, but the only legitimate way of getting round this benefit's trap is a citizen's income which removes the bureaucracy of means testing and frees people to take any job and not be financially worse off as a result.

If we accept that everyone in this country should be entitled to basic shelter, food and energy costs as a minimum, we should then look to the citizen's income as the most efficient way of providing this. The present complicated and expensive welfare system has got bogged down in unneccesary bureaucracy and is discouraging people from work.


  1. Why would we need a minimum wage if we're offering a citizen's income that is enough to keep people out of poverty? By allowing those wages that were initially below the minimum to fall back to their 'true' value, perhaps some of the jobs that were lost could be restored - even if only taken for a few hours instead of full-time, and without people being forced to take them through poverty.

    We could always take a moral position and say that any wage below X is immoral and shouldn't be allowed, but I though the point of the citizen's income was to reduce the number of rules, rates, and limits that lead to the 'poverty trap'.

  2. Thats what I said. With a citizen's income we don't need a minimum wage. You must of misread what I've put, unless I have just written it so badly ...

  3. You're dead right, I misread:

    "but this does not mean that in the absense of such a citizen's income, we don't need a minimum wage in the meantime."

  4. I have a tendency to use double negatives, it is rather poor use of English, I know, sorry about that.

    I've been re-reading some of my posts from a few months back and they are much better written. I'm losing it a bit, my latest posts have not been up to scratch, which is a shame because I'm getting over a 1000 hits a week now and when I was writing good stuff I was getting hardly any hits. Oh well!