Tuesday, 7 July 2015

Come on, George, do the right thing

He could do it
(Wikipedia/HM Treasury)
I'm a bit wary of blogging about anything vaguely political as Henry Gee tends to get upset when I do, but I hope he'll approve of this one.

Unlike some of my red flag waving friends (whose opinions I respect, but often disagree with), I do believe that it is possible to be a caring Conservative. And that's what I'm asking George Osborne to do. Specifically I think he should take the opportunity of the budget to put in place a plan to raise the minimum wage to the living wage.

The accountants KPMG has announced that to do so would only add 1.3 per cent to the national wage bill, but would lift 6 million people out of poverty. Of course, being accountants they want to do it voluntarily - but it won't happen that way. I see no reason why the minimum wage shouldn't be a living wage. In fact arguably it's obscene that it's not.

To give a feel for the numbers involved at a personal level, the minimum wage for a 21-year-old is £6.50 an hour compared with a living wage of £7.85 an hour. (The living wage is £9.15 an hour in London, of which more in a moment.)

Now with my 'check the stats' hat on, there is one issue with KPMG's sweeping statement about the percentage increase, in that such a move would hit some employers a lot more than others, because some have a much higher percentage of low wage employees. So that '1.3 per cent' is a little misleading. But it still gives a picture of the overall impact.

Here's the thing. If a business genuinely can only survive by paying workers less than a subsistence amount, then it isn't a viable business. It is time to move on and do something else. But in reality, the vast majority of businesses who would cry havoc and doom at such a suggestion would be perfectly capable of absorbing the increase. And from the country's point of view, not only would we lift lots of people out of poverty, we would automatically reduce the tax credit burden, one of the government's main aims.

To make it practical, I would suggest giving companies with 100 or more staff a year to implement it, and smaller companies a staged introduction over five years, as I am well aware that even small changes in costs can take a small company time to absorb.

What do you say, George? You know it makes sense.

I do have one controversial optional extra, which would reduce the burden on employers even more, but I want to make it separate, as it isn't necessary to do the right thing to do, but I think is worth considering.

I would scrap the London differential on the living wage (and any London allowances if they still exist). At the moment we subsidise London's ridiculous prices by paying people extra to work there. Once London stops getting workers because they can't afford to work there it would focus the minds of the Mayor and others wonderfully to ensure there really is affordable housing etc. Painful in the short term, but worth it in the long term. However, I stress this is an optional extra.


  1. > [T]he vast majority of businesses who would cry havoc and doom at such a suggestion would be perfectly capable of absorbing the increase.

    The other point to make is that by under-paying their staff, who go on to receive income support from the government, these businesses are being subsidised by the British taxpayer. Some of them are huge multinationals.

    1. Indeed - hence the remark about the tax credit burden, but I guess it applies to wider in-work benefits.

  2. http://www.resolutionfoundation.org/media/blog/will-wages-fill-the-tax-credit-gap-dont-budget-for-it/

    1. Interesting, but I don’t buy the argument about not mandating it - as I said, if a business really can’t afford to pay that, they aren’t a viable business. And of course it won’t get rid of in-work benefits, but it would be bizarre to argue that it wouldn’t reduce them. The article is also obsessed with the ‘official living wage’ - saying 'it wouldn’t guarantee families a decent standard of living.’ But are the suggesting this means we should pay people less? Bonkers.