Increase the Minimum Wage: it’s a no-brainer

This year marks the fifteenth anniversary of National Minimum Wage (NMW). It has boosted pay at the bottom without leading to a loss of jobs, and now has wide industry support 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 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.

When the NMW was being proposed, there was widespread opposition from business organisations and from Conservative and Liberal Democrats. Neither David Cameron nor Vince Cable like being reminded of their opposition, as they both claimed that a NMW would inevitably lead to job losses and increased unemployment.

More recently, a number of Conservative MPs have tried to scrap or diminish the policy.  In 2012, Andrea Leadsom MP said that businesses with three employees and fewer should be exempt from minimum wage, as well as regulation like maternity and paternity rights.  Leadsom said:

“I genuinely think we have to focus on deregulation. …..No minimum wage; no unfair dismissal; no maternity or paternity rights; no national insurance or employer pension contributions; a flat rate of tax; no red tape.”

Dominic Raab MP has called for the minimum wage to be suspended for 16-21 year olds. Philip Davies MP said employers should be allowed to pay disabled people less than the NMW. Another group of Conservative MPs have argued that employees should be allowed to opt out of the NMW altogether.

For the first decade of its life, the NMW increased at a faster rate than inflation. NMW generally increased above or in line with average earnings. Following years of rising inequality, the lowest earners began to catch up with middle-earners after the introduction of the NMW.

However, since 2010, the value of the NMW has fallen by 5% in real terms. If the minimum wage had increased in line with inflation over this period, low paid workers would be earning 32p an hour more than they are now. Today the UK has the second highest rate of low pay in the OECD, with more than five million workers paid less than the Living Wage in the UK.

Just as worrying is that the Government has completely failed to ensure proper enforcement of the minimum wage so that vulnerable workers are protected.  Despite annual Ministerial statements that employers flouting the law would be named and shamed, they haven’t named a single one yet.

Despite the pitiful number of enforcement staff, since 2009, HMRC has investigated 10,777 firms for allegedly breaking the law on low pay, collecting £15.8m in arrears payments and imposing £2.1m in fines. In the last 4 years, just two employers have been prosecuted for paying below the NMW, despite an estimated 300,000 people being paid less.

It is little wonder that many frustrated job-seekers feel that they are being undermined by people being paid less.

Of course, there always has to be a balance between wage growth and the impact on employment. However, it is clear to me that urgent action should be taken to restore the value of the NMW and to enforce it. This would actually cut public expenditure, as there would be savings from lower tax credits and benefit payments, as well as increased tax revenues.

It’s a no-brainer really. 

Incapability Assessment

In 2007, the then Labour Government introduced Work Capability Assessments (WCAs)[1] – a new way of assessing an individual’s abilities and disabilities, capacity to work and entitlement to benefits. Quite rightly, the under-pinning assumption was that everyone should be assisted to work if they are able, recognising the support that might be required, and providing the appropriate benefits to help an individual with a disability to play a full part in society.

Unfortunately, since 2010, the coalition government decided that the primary purpose of  WCAs is to ‘get people off benefits and into work’.[2]  However, the government forced through assessment processes that weren’t fit for purpose and contracted out the assessment process to the multi-national company ATOS, whose performance has been a disaster - a catalogue of long delays and poor decisions, causing misery and fear to thousands of people across the country.[3]

Crisis meetings between ATOS and DWP revealed that recruitment failures had left the company with a severe shortage of doctors.[4] This compounded the widespread incompetence in the delivery of work capability assessments which lead to 40% of ATOS’s decisions being appealed, and one in every three appeals being upheld. Thus, one in every seven decisions has been demonstrated to have been wrong. In addition, last May, the courts have determined that the processes disadvantages people with mental health problems, learning disabilities and autism, and, in December, the Court of Appeal threw out the government’s appeal against that judgement.[5]

By May 2011, 63% of initial claims were taking longer than 91 days to process. By the second half of 2011 this had risen to 77% and by the first eight months of 2012 this figure stood at 82%.[6] Last week, the government was forced to admit that ATOS is failing to meet 63 of its 96 Employment and Support Allowance targets - which require ATOS to process all ESA applications within 35 working days.[7]

Things are so bad that the government has stopped publishing performance data. The October 2013 statistical release for Work Capability Assessments did not include either the statistics for the assessment of existing Incapacity Benefit claims, nor the outcome of appeals of initial WCAs. And these statistics still haven’t been released.

This is not surprising given that the July 2013 release had revealed

“to date 39% of all Fit-for-Work decisions have been appealed against. 70% of initial Fit-for-Work decisions appealed against were upheld after challenge; and 30% of initial Fit-for-Work decisions appealed against were overturned after challenge”.[8]

The Department of Work and Pensions’ Annual Report was published in December. It confirmed:

“5.5.1 A particular example of the control challenge around commercial suppliers identified above is the number and quality of Work Capability Assessments undertaken by Atos Healthcare, in support of both Employment and Support Allowance and the programme to reassess Incapacity Benefit claims. The number of assessments has fallen consistently short of demand... 5.5.3 The work by Atos Healthcare to improve quality further reduced the volumes of completed assessments. This further increased the numbers of cases awaiting assessment.”[9]

It’s clear that it is the government and the contractor it chose which need incapability assessments, not the unfortunate people who are trapped in this wretched process.

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[1] Welfare Reform Act 2007

[2] Welfare Reform Act 2012

[3]https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/224808/esa_wca_summary_jul13_v0f.pdf

[4]https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/224808/esa_wca_summary_jul13_v0f.pdf

[5] http://www.bailii.org/ew/cases/EWCA/Civ/2013/1565.html

[6] https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/265351/work-capability-assessment-year-4-paul-litchfield.pdf

[7]http://www.publications.parliament.uk/pa/cm201314/cmhansrd/cm140106/text/140106w0002.htm#14010631000011

[8]https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/224808/esa_wca_summary_jul13_v0f.pdf

[9] https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/264555/dwp-annual-report-accounts-2012-2013.pdf