Five Pounds and Five Pennies

Five pounds and five pennies

So the government's official minimum wage is going up to just over £5 per hour (£5.05 per hour for adults, it should be going up again in autumn 2006). Many people will instantly scoff at £5 per hour and regard it as still a miserable low wage. Nevertheless for several million workers at the bottom of the scale it appears to be a small but real positive increase as a figure. Just as importantly it also appears to provide an enforced basic level of protection. But before we start celebrating and singing the praises of the labour government, let us remind ourselves of what the minimum wage is really all about.

The minimum wage legislation was in part forced upon the government by international trade agreements and international bureaucratic regulation amongst the leading developed economies, it wasn't something they dreamt up on their own.

One of the immediate benefits of the minimum wage from the government's point of view, what made it particularly attractive for them to accept it in the end, was that it is a clever popular means of capping the level of benefits the government is prepared to pay to subsidise the incomes of low paid working families. The state is not going to allow workers to work legally for a lower wage while making up the difference for their family's subsistence in benefits. So the slight increase in wage is partially countered by the capping of benefits. It supposedly establishes a competitive "level playing field" and prevents individual companies from gaining competitive advantage by social dumping at the expense of the state.

In parallel to this however, we shouldn't lose sight of an estimated 700,000 or more workers in the U.K. who are still illegally being paid less than the minimum wage. Bureaucratic state regulation rather than protecting them ends up doing the opposite, it pushes these "precarious" workers and their jobs further underground and into deeper precariousness so they get paid less. The state is quite happy to keep towards a million in an "illegal" and "underground" sector, attempts at repressing it are usually half-hearted. this sector is vital for subsidising the U.K. economy, and by boosting the economy in general it also helps in turn to indirectly boost government revenues! The government doesn't like to admit this out loud but it knows this. many in this "illegal" sector are migrant workers deprived of citizenship.

Bureaucratic state regulation of employment in the form of measures like the minimum wage in reality tends to favour the bigger employers against the smaller employers. It is easier for both state sector employers and big private employers to cope with the cost and hassle of bureaucracy. The more intelligent bigger employers can recognise it is in their longer term interests to socially engineer the workforce and keep them on a certain guaranteed level of income for their health and fitness so they are fit enough to carry on working. They will put pressure on the government to play the role of social engineer.

Smaller employers meanwhile are pushed to the wall by bureaucracy and regulation. For instance, smaller sized low profit manufacturing firms get squeezed by regulation, this kills many legitimate on the books jobs for lower skilled, less qualified, blue collar workers. When these smaller employers are sometimes able to pick up and be more dynamic and generate more profit they can be more vulnerable, as small employers, to workers taking action and winning wage rises. So the minimum wage can be used to help the bigger employers stabilise lower end wages in the legal economy and dampen erratic "wage creep".

We are told the rise in minimum wage is above inflation, but as has been said above, the official inflation figure leaves out many costs which particularly hit those on low incomes, such as rent and housing costs, council tax, transport costs etc., which have risen sharply in recent years. So we certainly don't need to cringe, doff our caps, and feel we have to be grateful to Labour and the TUC for kindly giving us the minimum wage.

Nonetheless, despite all this, it is only in certain unskilled and low skilled sectors in the U.K. that workers are stuck on low wages, in many other sectors wages are still rising.

Paul 2005

Whinger Press

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