It seems Nu-Labour are just desperate to remind us of all their ‘good’ policies. Probably because there is an election coming up and they’ve destroyed the economy, public finances, Iraq, Afghanistan, the Education system…
Anyway, one of the ‘good’ policies they wish to remind us of is the minimum wage. Which was recently promoted by Jack Scott on Labour List…
Next week, the minimum wage will rise to £5.80. Since it was first introduced in the teeth of Conservative opposition, the minimum wage has risen by 81.25%, far outstripping a decade of low inflation. Does anyone believe the Tories would have raised it above inflation so consistently?
Since its introduction, Labour has also legislated to ensure tips do not count towards the minimum wage and that there are the toughest powers in Europe for rogue employers who break the law. The
Conservatives voted against the introduction of the minimum wage and its strengthening, which went through Parliament last year.
In addition, David Cameron opposed longer maternity and paternity leave and flexible working – so much for Cameron’s compassionate conservatism.
Only a Labour government can truly protect workers’ rights. The minimum wage remains one of Labour’s most powerful expressions of our values in action. I am immensely proud of the difference it makes to the lives of the UK’s million lowest paid workers.
For socialists and Nu-Labour the minimum wage is a traditional, social good. It takes profits from evil capitalists and shares it among the workers. Hurrah!
However, in reality it is debatable whether the minimum wage is a social good. In fact I would argue it isn’t. And they’re are two main reasons for this.
The first and most obvious is that it raises the cost of business — unnecessarily — as businesses are forced to raise the wages of low skilled employees. And this is an important point. Because while it may seem that there are lots of evil capitalists out their making huge sums of money by exploiting workers the truth is very different. The majority of businesses are SMEs which make very small profits. So whenever costs of business go up these businesses are under threat as their profit margins are much smaller than the ones enjoyed by the Tescos of this world. And of course this therefore puts many jobs at risk.
The second — and most important — reason is that the minimum wage will never actually raise the value of labour. It is impossible to raise an asset’s value by simply declaring it has a greater value. Or at least it’s not possible to do this for very long. The reasons for this should be obvious. It is because the factors that influence value — such as supply/demand — don’t actually change simply because of some government declaration.
For example imagine it was decided that bakers were the most important part of our economy and that they were being underpaid for their fine work. The government therefore sets a National Minimum Bread Price of £3 per loaf. Sounds great for the bakers. But this action is unlikely to make bakers better-off or happy. Instead it will probably cause people to buy less bread. Because in real terms the bread has become no more valuable — so why will people pay more for it?
And the same rules apply for the value of labour. One of the main consequences of the minimum wage is it makes low skilled workers less employable. Because unless your skills/labour are worth £5.80ph or above, who will employ you? No-one. You’d have to be a very poor business man to employ someone who’s work was not worth the money you paid them.
People should be very hesitant to support the minimum wage. Because while it sounds nice on the surface it has a number of drawbacks. It jeopardises business profitability — which risks jobs. And it makes many of the low skilled unemployable. Which means they may never acquire the experience or skills that will help them gain higher wages in the future.
Ultimately if people want to improve the lot of the lower paid it can only be achieved by generating more wealth. And that cannot be achieved by placing undue burdens on business or creating limitations to employment. So if you are a Nu-Labour supporter I think you need to search a little harder for those ‘good’ policies that you are trying to remind us of.
Rob Waller sits on the NCC of the Libertarian Party and regularly posts for the LPUK South East Blog.