Labour’s Minimum Wage Link – will affect the UK recovery/jobs.(40 Posts)
“Minimum wage hike could be coming to Britain”
“Britain's opposition Labour party will pledge to raise the statutory minimum wage if it wins the next election, as the wages of economies' lowest paid workers make headlines worldwide”.
“Labour party leader Ed Milliband will announce plans to increase the minimum wage over the course of the next parliament by linking it to the UK's average earnings.”
“The minimum wage in Britain is currently £6.31 ($10.62) an hour, and is due to rise to £6.50 in October. It is set by the Low Pay Commission, an independent government body.”
“Labour has not revealed what it would raise the minimum wage to, saying the exact amount would be announced closer to the next general election in May 2015.”
“In the U.S., President Barack Obama is trying to raise the federal minimum wage from $7.25 an hour.”
Whether a business is small, medium, or large, it has to plan/budget ahead, the largest several years, looking to invest new money domestically, overseas - or even relocate existing businesses to business friend countries in order to compete in terms of Productivity, in a global market place where the cost of doing business can determine if a profit is made, or even a company’s medium to long term survival.
Wages are a major component of Productivity, so how can ANY blanket national formula work that ties in a national wage average of ALL business sectors, with lower profit/profit margin sectors, where trying to ‘keep up’ with a national wage structure will either make them shed staff, or go out of business.
As the UK recovery gathered pace, IMO the economy could quickly have a dangerous UPWARD SPIRAL of the BoE raising interest our Base Rate to contain inflation, and minimum pay rates continuing to rise along with the economy - which will both become wage growth inflationary and counter economic growth as UK businesses become less Productive – resulting in a kind of self induced ‘norm’ of Stagflation (flat economy & high inflation) affecting peoples spending power.
What with populist rent controls that could smother the Private Rental market when we need it most;
And an ‘energy price freeze’ when Energy Minister Miliband left the Uk in a dire nuclear energy situation, totally reliant on the Private Sector to invest in the UK, to stop our lights going off within years;
Miliband’s attempts at unworkable State controls, to curb the effects of a SEVERE recession plus the home and energy shortages that are all of their own making, may be populist vote winners that resonate on the doorstep – but they send major alarm signals to business (and landlords) of the negative conditions to expect from 2015 under a Labour administration.
I would therefore not be surprised if on the continuing weight of planned State interference businesses hold back on the further investing and creating of new jobs in Britain - AND put in place contingency plans to scale back the size and employment numbers of their current businesses - until after the 2015 General Election.
In 2015, the UK will still have a large annual Budget deficit and therefore accumulating National Debt; Mr Miliband’s ‘cost of living offers’ may not DIRECTLY increase them via state spending, but as the UK needs sustainable economic growth and/or much higher taxes TO PAY THEM OFF continual threats of State intervention that looks good in pamphlets but will kill off investment, is economic madness.
Yeah yeah yeah...
Yeah, yeah yeah, The Tooting Popular Front’s continual struggle against all corporations, as the UK has a god given right to perpetual Private Sector investment/jobs.
Which of the following is going to be able to absorb the costs of some annual increase in the Minimum Wage - based on some multi business sector formula, dreamed up by some old boys from Oxbridge Socialist Student Debating Society - now in Westminster?
The McDonalds Corporation or the local greasy spoons on every High Street?
Awww look at you, trying to appear folksy by appealing to the local Mom & Pop store! How cute.
Opposition to a rise in minimum wage again, is ideological. The minimum wage has already been falling behind in real terms and is worth less now than it was in 2004. The sky didn't fall then, and it won't fall now.
Inadequate minimum wage isn't working, says its chief architect Sir George Bain
How do you propose the government work to close the huge inequality in the UK then? It can't be right that the richest are getting richer and the poor are getting less because 'trickle down' doesn't work, those with the most are too greedy and powerful for it to work.
Not to mention tgat paying someone a wage which is too low to live on, and them having to be topped up by the welfare stare is effectively the business (and its profits) being subsidised out of taxes/NI.
ttosca …. May I start with putting the record straight on a few things;
I am not against any rises in the Minimum Wage, far from it, I know too many people trying to live on it and I’m glad that in 2014, those on it will receive the FIRST REAL TERM INCREASE SINCE 2008/9, as your link shows on the graph within.
“The government has approved a rise in the National Minimum Wage to £6.50 per hour later this year (2014), with more than 1 million people set to see their pay rise by as much as £355 a year.”
“The rise will take effect in October 2014, as Business Secretary Vince Cable has accepted in full the independent Low Pay Commission’s recommendations for 2014, including plans for bigger increases in future than in recent years.”
“The Low Pay Commission (LPC) has said the rise, the first real terms cash increase since 2008, is manageable for employers and will support full employment.”
Next , looking at the COLD PRACTICALITIES of yet another Miliband ‘cost of living’ gimmick, writing future promissory cheques with Private Sector money he foolishly assumes will have no adverse affects, like ceasing to provide investment/services, is not just a problem for local stores, it is all small to medium sized businesses.
So now lets put straight to bed that this will somehow narrow the wealth gap between ‘the richest and the poorest’, as I doubt if there will be any ‘trickle down’ from the mega rich Russians, Chinese, Indian, American’s and even British – especially as the majority of large companies are owned by shareholders, like our pension funds – so may we please drop the ‘class’ and ‘wealth’ Labour Party slogans.
THE POINT I thought that I made in my opening post, was that how can ANY business that employs workers annually budget effectively, never mind for years ahead, WITH THE VAGARIES OF A NATIONAL PAY AVERAGE, that will have nothing to do with their specific sector, or more importantly, ability to pay those rates?
Examples of what tends to happen in the work place if minimum pay rates rise, never mind significantly in the future, is;
- Larger companies look to mechanise as much of the work as they can = less lower paid jobs.
- Small to Medium companies just making profits cut back = less jobs and/or less hours offered.
- The young suffer – as if a company is paying more, why take on a spotty ‘youf’, when you can have an older, better educated candidate from here or Eastern Europe?
The coalition inherited nearly 1 million unemployed 16-24 year olds from Labour, nearly 600,000 of them were unemployed in 2004 (see where I’m going with this), so we need policies to ENCOURAGE the company take up of young unskilled workers, like Osbornes targeted policy giving employers a National Insurance holiday to take them on – not continue the 2004 policies that gave us a ‘lost generation’ and encouraging businesses to hire ‘better value’ from here and abroad.
Donki …. Lets look at your point on the current disparities in our system from a different ‘tax’ direction; on the rate and how it is being spent.
Labour/Miliband once again are looking for Private Sector punishing solutions for their cock ups, so WHAT IF;
- Labour had not ‘diluted’ the jobs market and the commercial unskilled rates of pay with their immigration policy.
- Labour had not taken away the 10p start rate of tax, that particularly helped the lower paid.
- Labour had channelled more taxpayers money into REDUCING taxes and National Insurance for the poor (instead of raising them), rather than condemn them to in work benefit dependency, choosing to spend it on big, inefficient government, putting up the costs to business in doing business, with new red tape and regulations from government paid jobsworths trying to justify their salaries?
In growing the size/employment of an inefficient State and paying for it with higher taxes, as jobs in the likes of manufacturing plummeted, Labour’s policies showed that ‘the few’ were benefiting from ‘the many’ – only their ‘few’ are neither few or the rich.
In conclusion; until Labour get their priorities right in SPENDING OR REDUCING our taxes, populist policies penalizing businesses, their investment and job creation PAYING those taxes, it is another economic crash waiting to happen – and with a current £108 billion annual deficit and heading for £1,500,000,000,000 (£1.5 trillion) of national Debt in 2015 – that is the LAST thing we need to both pay off that debt and continue to grow the UK economy/jobs.
You use a whole lot of words to say not very much. Your arguments are nonsense.
I'm really tired of taking your rants seriously and debuting each and every point.
You're not the first one to consider the consequences of a minimum wage. This debate has been going on for decades. The arguments are well trodden already.
* The minimum wage has already fallen significantly behind and is lower in real terms than it was in 2004.
* The UK min wage is about average for developed Western countries. There are many countries which have a significantly higher min wage and have very successful economies.
* There is no 'vagaries of a national pay average'. You're just making stupid things up to sound serious. The year on year change would be minimal.
* Raising the minimum wage is likely to create more jobs than (any) jobs it costs. This is because when the poorest have more money to spend, they spend it immediately (on essentials). This stimulates demand in the market. People buy more. Business prospers and hire more people.
* I'm tired of your shit.
Your tired of it because it shows time and time again your failed anti business that ideology; as where has it worked, Russia, China, where?
How did it work in 1979?
How did it work in 2010?
Put yourself in the position of anyone putting their all, including their family's future in a business, start up or otherwise, how the hell can you work out your labour costs one year from next on a national average that includes what, the City and all other high paid sectors?
Show me some countries where a HIGH Minimum Wage creates jobs - and maybe start with the U.S. as how much in English Pounds Sterling is $7.25 an hour, that Obama via spin maester Mr Axelrod is trying to change for votes, against the viable commercial interests of America.
Are you seriously saying that a much higher Minimum Wage, which I have to assume is Mr Miliband's objective, as why bother if it is not - will affect Corporations and small businesses the same - and that small to medium businesses, the back bone of our economy can all afford it???????
30 years (since 1979) of neo-liberal economics of privitisation, deregulation, low-corporate taxation, and general corporate cocksucking has given us:
a) A crisis of democracy, where we have the choice between neo-liberal business parties or fascists
b) Stagnating wages for the vast majority, even in the face of increasing worker productivity
c) The cost of living skyrocketing, most due to profiteering of private companies from essential utilities.
d) The highest wealth inequality since the 1920s
e) The worst financial crisis since the Great Recession
f) Little or no job security for the majority of the population.
Neo-liberalism has failed.
Stop trying to sell shit. That's exactly what you're doing. The Tories offer nothing but more of the same neo-liberal shit. The public has had enough.
The evidence suggests a small disemployment effect as a result of a rise in the minimum wage in competitive markets. In non-competitive (monopsonistic and oligopsonistic) markets there's evidence to suggest that higher wages (as brought about through a higher NMW) actually raise productivity through increased effort (efficiency wages) and the old Pigouvian notion of the 'economy of higher wages'.
This study concludes that the impact on poverty needs further research.
Larger companies look to mechanise as much of the work as they can = less lower paid jobs
This depends on the elasticity of substitution (capital for labour). Given that almost half of all NMW recipients are employed in wholesale and retail, and hotels and restaurants these industries have lower labour:capital ratios than other industries so the possibility of substituting labour for capital is limited. The impact on employment would be small
Small to Medium companies just making profits cut back = less jobs and/or less hours offered
There is evidence to suggest that fewer hours are offered as a result of raising the MW.
The young suffer – as if a company is paying more, why take on a spotty ‘youf’, when you can have an older, better educated candidate from here or Eastern Europe?
Empirical evidence suggests that this is not true.
Thanks OP for giving me the opportunity to use some of my favourite words (oligopsonistic and Pigouvian)
TheHammaconda ….. it was my pleasure, I now have grown up words to look up over coffee, rather than sitting here reflecting on ttosca the-not-so friendly dinosaur’s pre 1979 ‘good ol days’, when UK wage demands drove UK manufacturers/industries out of business, often after years of taxpayer subsidised nationalisation and an IMF bailout – ahhh I remember them so well, I can’t think why they had to change.
My problem with your post and it’s “evidence”, is that I seriously doubt if those Minimum Wage increases were anything like as drastically non commercial as Miliband is touting, clearly worried about all these Leftie political splinter groups setting up and throwing serious ‘red meat’ in their direction – so who says he’ll do anything for votes?
“Election 2015: Ed Miliband targets minimum wage for maximum gain”
“Labour will pledge today dramatically to increase the minimum wage paid to millions of low-income workers in the biggest shake-up of the scheme since its inception.”
“Under plans to be set out by Ed Miliband, Labour will commit itself to raising the minimum wage significantly faster than growth in average pay over five years if the party wins the next election.”
“Currently, the minimum wage is just 53 per cent of median earnings and has fallen by 5 per cent in real terms since 2010. Labour pledged that its target for increasing the minimum wage would help to reverse years of growing income inequality.”
And in answer to MY QUESTION, it appears that the Minimum Wage will be more equal for some than others
So not so much A Minimum Wage, more like Labour State Wage controls more akin to the 1970’s, which with State Controlled Energy Prices, State Controlled Rents, State Controlled Home Building (200k a year paid for how?) and no doubt State Controlled bank lending (as that worked so well with Northern Rock, RBS and Lloyds) – if that lot does not destroy business, business investment and jobs, I don’t know what will, since 1979 at least.
“Labour is also backing proposals to set sector-by-sector minimum wages – so that minimum hourly rates of pay could be higher in some jobs than in others. Under current arrangements, the minimum wage – which is due to rise to £6.50 in October – is set by the independent Low Pay Commission, which is made up of representatives of industry, unions and academics.”
“It is tasked with striking a balance between the need for wage growth and concerns about the impact on employment and economic growth.”
TheHammaconda ....... a Minimum Wage set differently across industries, all playing 'catch up' with earnings over 10-15 years, with rises over 5-years – do you not agree with me that those types of threats will make employers think again about hiring from now until 2015, never mind after?
Do you agree with me that such pay increases would totally freak out the BoE re inflation, that can look the other way if it is caused by say a weak Sterling and external factors i.e. more expensive imports and rises in the oil price – but WAGE inflation leads to higher structural inflation = MUCH HIGHER UK INTEREST RATES.
Economically, adopting Stagflation as a business model by policy design, would be suicide for the UK, so either this is another policy lie a clearly desperate Miliband won’t be able to keep, or if not, come 2015 Labour better make an early appointment with the IMF to sort us out again.
P.S. This is a good article (once past the advert), which although supports my views, it has those of others from the other camp
> So not so much A Minimum Wage, more like Labour State Wage controls more akin to the 1970’s
This doesn't mean anything.
Yeah, Forbes... the Daily Mail for the 1%.
IIRC....isn't this an echo-ey repeat of what they said when the NMW was first introduced? That the free market/business/country/world/mankind would collapse and be doomed?
Did not happen did it?
Oh wait...it did a bit...but 'twas the greedy
See, this is the problem: Milliband has just said he's going to increase the minimum wage, he hasn't said by how much. This makes it impossible to draw any conclusions about the impact of an increase in the NMW and employment.
The bulk of the economic research I've read (and these are articles from economics and econometrics journals, I'm afraid I can't remember the exact citations) suggests that there would a small disemployment effect as a result of an increase in the minimum wage. Therefore, unemployment may rise.
Until the size of the increase in the NMW is known you can't determine whether there will be any inflationary pressure. If the increase is to offset the 5% real terms fall in the value of the NMW since 2009 the inflationary impact would be small. You're right to mention that wage inflation => higher inflation but are confusing a rise in the NMW with a rise in the general wage rate. The two are not the same.
Therefore the likelihood of stagflation is low.
That Forbes article has a far too simplistic view of the theory of demand for its conclusions to be at all relevant. Especially theories of demand for labour in different labour markets.
ttosca …. I show you a qualified debate from a reputable Forbes source, and what do you give me on the Competitive High Minimum Wage countries comparisons….cartoons, I don’t know, I never click on your rubbish links – come on Chuckles, what do you have, as it clearly isn’t the U.S. on $7.25 (with an exchange rate around $1.67 to the Pound)
- No comment on what happened to UK industry after the 1970’s trade union demanded wage packets, before we entered this ‘neo’ shite, where at least the companies STAY OPEN to pay a salary.
- Re Labour State wage controls of the 1970’s (and didn’t they also try to freeze rents back then as well), does this jog your memory?
The Winter of Discontent refers to the winter of 1978–79 in the United Kingdom, during which there were widespread strikes by public sector trade unions demanding larger pay rises, following the ongoing pay caps of the Labour Party government led by James Callaghanagainst Trades Union Congress opposition to control inflation, during the coldest winter for 16 years.
The strikes were a result of the Labour government's attempt to control inflation by a forced departure from their social contract with the unions by imposing rules on the public sector that pay rises be kept below 5%, to control inflation in itself and as an example to the private sector.
TheHammaconda …. I agree, we DON’T KNOW how high different Minimum Wages will go across different business sectors, BUT NEITHER WILL EVERY HIGH STREET SHOP, UP TO LARGE CORPORATIONS – that is my point, and it is if Miliband for 2015 electoral purposes, is trying to stifle business investment and job creation, just as it’s picking up momentum.
Such threats, with the other rent/energy controls creates huge business/investment uncertainty now in areas we need it, and anyone who follows other economies will know what happened to the ONE country that tried the socialist route to get out of the recession, France - and due to those (failed) policies that killed growth and jobs, it had to be reversed.
“How Francois Hollande changed but Ed Miliband stayed the same.”
Clearly what Miliband is saying is that the independent Low Pay Commission, that I believe includes trade union representation, is not doing it’s job and is intimating that there will be annual increases “SIGNIFICANTLY FASTER THAN GROWTH IN AVERAGE PAY OVER 5-YEARS” - so if Miliband isn’t lying, that is a significant rebalancing of wages upward, which IS inflationary, will bring down Productivity as ‘unit costs’ rise, which will cut UK business investment and jobs.
“Under plans to be set out by Ed Miliband, Labour will commit itself to raising the minimum wage significantly faster than growth in average pay over five years if the party wins the next election.”
“Currently, the minimum wage is just 53 per cent of median earnings and has fallen by 5 per cent in real terms since 2010. _Labour pledged that its target for increasing the minimum wage would help to reverse years of growing income inequality._”
We really shouldn’t have to follow France ‘to see what happens’ when the lessons have been learned there, and Miliband obviously scared shitless he won’t lead the largest party in 2015, is being TOTALLY IRRESPONSIBLE announcing such intent NOW, without more details other than rises will be ‘significant’.
Personally, I think it's time elected leaders started acting in the interests of those who elect them, those who they are accountable to and those whose taxes pay their salaries rather than businesses.
Miliband isn’t lying, that is a significant rebalancing of wages upward, which IS inflationary, will bring down Productivity as ‘unit costs’ rise, which will cut UK business investment and jobs.
No, it would be raising the minimum wage not all wages. Raising wages is not always inflationary - it depends what is happening in other areas of the economy. Raising the minimum wage is not necessarily inflationary either, it depends on what is happening in other areas of the economy. For example, what would happen if the NMW were raised at the same time as VAT were lowered?
Productivity = output per worker per hour. Wages are, or at least should be in a competitive market, determined by a worker's productivity. The problem we have is that labour markets are not hugely competitive - firms are too powerful.
TheHammaconda ….. I liked your opening line, it was that good I (and almost every socialist in the country) almost decided to vote for you. Lol
The problem that I’m alluding to is the VIABILITY of a “significant increase” from the £6.50 ph set for later this year, from the political party who’s own joined-up-policy-thinking involving immigration, domestic unemployment and home building, does not give me confidence to believe Labour/Miliband has thought through the wide ranging implications of the Minimum Wage playing catch-up with the average/median earnings – especially in light of the following.
(Feb 1 2014) “Osborne taken to task on call for £7 minimum wage”
“George Osborne was wrong to raise hopes that the national minimum wage could be restored to its pre-recession value of £7 per hour before the election, business department insiders have warned.”
^“There is “no way” the Low Pay Commission, which sets the minimum wage, would sanction such a steep rise this side of the election, said one Department for Business, Innovation and Skills insider. “We have no idea how they got to the £7 figure,” said another. “We are baffled.”^
The inflationary aspects of a significant raising of the Minimum Wage, and the knock on affects in raising the Base Rate faster than might have, is just one aspect, and I find it interesting that you mentioned the lowering of VAT, as some kind of policy fiddling counter balance.
As when Labour decided for a 13-month lowering of VAT to 15% I believe – that AT THE TIME was ‘funded’ by the raising of National Insurance after the election, that Mr Darling knew would cost jobs after the last General Election - and Osborne cancelled, probably in his first emergency budget.
As to Productivity (unit cost) and “firms are too powerful” ideology; in the former while I’m not sure how non factory workers e.g. the service sector, can become more ‘productive’ for their hourly rate rise, what I do KNOW is that businesses will also have to deal with all the other costs Labour will throw at them, either using their last administration as an example, or already mentioned ‘costing’ other policies;
- Higher Corporation Tax.
-Higher Income Tax compensation for senior staff, rewarding on/using international remuneration scales.
-Higher regulatory/red tape costs.
-Higher National Insurance costs.
-Higher Fuel Escalator costs,
- Higher costs of government intervention e.g. Energy Company ‘price freezes’.
-Higher Interest Rate/Borrowing Costs as they ‘normalize’, with or without a Labour policy premium.
-Now a much higher Minimum Wage?????
When Labour wants to fund it’s big inefficient State and/or votes, it just taxes without thought of whether businesses can afford it, otherwise they might have helped our exporters in the first several years of their administration, also having to cope with a strong Pound, before those million jobs went by 2005.
Further to my point re Miliband’s promise of Old Labour style State controls (vague or otherwise) and what effect that will have on the UK economy; this is a general interview with a man who owns/runs a successful UK company with an annual turnover in the £billions that has contributed £1.4 billion to UK GDP and paid £545 million to the UK exchequer
'Reverting back to old-fashioned socialism is stupid': JCB boss Lord Bamford warns of Miliband threat.
Coming of age, in business terms, at a time when Britain was being held to ransom was a formative experience. Lord Bamford’s nightmare is that history will repeat itself if Ed Miliband’s Labour Party is voted into power next year.
Political uncertainty, he believes, is deterring companies from investing the billions of pounds of cash they have on their balance sheets.
‘What I don’t think politicians understand is that investment decisions in companies are made by very few people. There is a human element and that is confidence. If people don’t have confidence they won’t invest. We are individuals affected by politics and the threat of Miliband getting in must have an effect.’
‘People are thinking, do I make this investment now, or do I wait until after May next year? It must be being asked in boardrooms up and down the country.’
‘I am not scared of Miliband because we are a democracy, but reverting back to old-fashioned socialism is stupid. It won’t work, it never has. Just look at France; just look at the damage that has been done.’
I reiterate an earlier point I made, businesses have to plan years ahead, especially the big ones and uncertainty on wage structures and taxes make them wary of pre 1979 Labour policies.
Join the discussion
Registering is free, easy, and means you can join in the discussion, get discounts, win prizes and lots more.Register now
Already registered with Mumsnet? Log in to leave your comment or alternatively, sign in with Facebook or Google.
Please login first.