Last
week’s spat over what government minister Lord Freud thinks about minimum pay
rates for people with disabilities has rather over-shadowed debate about the
National Minimum Wage itself.
This
year marks the fifteenth anniversary of National Minimum Wage (NMW). It
boosted pay at the bottom without leading to a loss of jobs, and has had wide
support from business as a result.
Before
it was introduced, some people were paid as little as £1 an hour. For
example, the Low Pay Unit found someone working in a chip shop in Birmingham
earning just 80p an hour. It also found a factory worker earning £1.22 an hour
and a residential home worker earning £1.66 an hour.
The
Conservatives and many Liberal Democrat MPs bitterly opposed the introduction
of the minimum wage legislation. Critics of the NMW said before its
introduction that it would lead to job losses. However, now, the widely
accepted consensus is that those predictions have proved false.
Today
the extremes of exploitation have been eliminated but the problem of low pay –
people working hard and struggling to make ends meet – has actually grown. Low
pay has got worse in the last 4 years and the value of the NMW has been eroded
in real terms since 2010.
Families
are on average £1,600 a year worse off since David Cameron and Nick Clegg took
office. The UK now has the one of the highest rates of low pay in the developed
world, with more than five million workers paid less than the Living Wage in the
UK. Low pay also represents a considerable cost to the Exchequer in the form of
in-work benefits and foregone tax receipts.
That’s
why I believe we need to see a more ambitious target for the NMW. It
won’t be quick and it won’t be easy, but that’s why we need to be determined.
There’s
no reason why a goal of halving the number of people on low pay in our country
by 2025 cannot be achieved if we have the commitment. A clear long term target
will give businesses time to plan and adapt their business models to boost
productivity to support higher wages.
