What do you think is a reasonable minimum wage? A lot depends on what you think is a good lifestyle. Running a car might be a luxury for some but essential for others (if you live in a village with no bus service or have elderly relatives who need help with shopping). But running a car is expensive. So should the minimum wage cover this?
It’s very hard to agree on the exact level of a minimum wage. But the principle is so important. Paying people a fair wage for a fair days work is the foundation of our economy. Of course this has to be balanced with the need for employers to be able to compete with companies in other parts of the world. But that’s the task of government – to balance freedom with care of the vulnerable.
So perhaps the more relevant question is what do you think is a reasonable maximum wage? There are now over 100 billionaires in the UK with a combined wealth of £301bn and this number has more than tripled in the last ten years. Some of these people may be very generous with their wealth but we should at least question why the rich are getting richer at a much faster rate than the rest of society.
Increasing the minimum wage by even a small amount would cost nothing next to the current increase in maximum wages.
The Rt Revd Martyn Snow, Bishop of Tewkesbury
This article originally appeared in The Gloucester Citizen
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Dear Bishop, I suspect there are several ‘issues’ here that the debate over a Minimum Wage does not take account of. Looking at the richest members of society and saying ‘that’s unfair, it should be redistributed …’ is, I think, a misleading argument, though I would tend to agree that there is a large question as to why so much is flowing to so few so quickly.
While I can see an argument for creating a Minimum Wage, everywhere it is introduced it has a number of impacts on the economy which are immediate. Taking the Australian experience as one example, young people suddenly became too expensive for elderly (and others) to hire to cut grass, clear roof and gutters of leaves or wash cars. Result, reduced pocket money for the youngsters, increased fire danger from bush fires and older folk struggling to maintain properties without help. Employers were also quick to reduce the working hours of employees who would have earned more than the minimum by working a few hours a week extra. That has happened in the UK as well. The third part of this problem is that the ‘wage negotiation’ mechanism now vanishes, with the minimum determined by Parliament and not the employer/employee – so the labourer becomes to expensive for many employers, who responds by reducung the number of people they employ. Then comes the fourth unintended effect – those who were earning more than the minimum are not awarded pay increases on the same generous scale determined by Parliament, so their pay differential is eroded steadily, and more and more employees find they are now ‘Minimum Wage’ earners.
This last factor slews the statistics kept by Whitehall and inspires Parliament to award another larger increase in the Minimum Wage, which starts the entire cycle again. We should not forget either that we are all paying for Parliament’s generosity since all these costs are built into the price of the goods and services we buy and use. As prices rise due to the inflation of wage bills, so pressure increases for more wage increases. In the last ten years I was in productive employment, I was lucky to see a pay increase of 2.5%. On most occasions the Treasury would not allow more than 2%. I rarely saw any benefit in my ‘take home’ pay because the increase in NI and Tax usually more than adequately took the increase and a little more.
The same happens to all those above whatever the Minimum Wage is. Worse, many employers (usually not the people who are billionaires) set the minimum wage as their ‘standard rate’ and place restrictions on the hours worked. That is, unfortunately, coupled to the ‘we are a twenty-four/seven operation’ which, despite Parliament providing ‘protection’ for employees who didn’t want to work on Sundays, now impose on all employees, a ‘you get two days a week off on a roster arranged locally’ scheme. For those wanting and needing employment, it is ‘take it or leave it’. Nice idea though it is, the unintended consequences unfortunately bring with them the likelihood of more people being trapped on ‘Minimum Wage’ and of many more gradually being reduced to it. This is one of the aspects that fuels the widening gap between the super rich and those we regard as ‘poor’.
I would suggest that a better way to get the low paid into a better finacial position is to provide a system of Tax free earnings up to a ‘Minimum Wage Threshold’ and then a phased Tax system based on proportion of income. 20% of fifteen thousand a year is a bigger drain on someone’s income than 20% of forty thousand. For those on ‘Benefit’ of any sort, they could be helped back into employment by reducing their benefits as their earnings rise to a predetermined threshold instead of the current practice of cutting off all the benefits and insisting on the payment of Tax, NI and the rest immediately.