Published:

110 comments

money

FULL employmentThe trouble with alarmism is that unless you’re absolutely right, it is a recipe for long-term losses in credibility in return for short-term headlines (for reference, see Ed Balls on the economic impact of austerity). Often a more nuanced, more accurate, warning does less harm and achieves more in the long run.

So it has proved with the Conservative Party’s alarmist predictions about the introduction of the Minimum Wage in the 1990s. It did not immediately put large numbers of people out of work – and as a result, the dire predictions have become a stick with which we have been beaten ever since.

The more nuanced, more accurate position which could have been taken was that a Minimum Wage would have little immediate impact, particularly in a time of robust growth, but it would harm the most vulnerable bit by bit and bite hardest when times got bad.

So it has proven. Those in the labour market whose skills and experience make them the most marginal hiring decisions for employers have lost out on new job opportunities since the Minimum Wage was introduced. Youth unemployment crept steadily up even during the boom years under Blair, and despite the beginnings of an economic recovery both the youth count and the long-term unemployment figures remain stubbornly high.

Despite those facts, the failure to make the right argument in the 1990s still hobbles the debate today, with any concern met by reminders of that flawed alarmism.

Now Tory proponents – Ryan Shorthouse of BrightBlue, Robert Halfon, the Harlow MP and David Skelton of Renewal outside the Government, and Matt Hancock and Iain Duncan Smith inside it – are making the case for an increase in the Minimum Wage.

There seem to be three broad reasons given for a rise (though it’s worth noting that by no means are all three shared by every advocate of the idea).

First is the cost of living. It’s a fact that real wages have been falling, and the real terms value of the Minimum Wage has fallen for six years running, back to the levels of a decade ago. These are serious problems to which the Government has yet to come up with a solid answer. The desire to address the problem is one which every decent Tory should share.

And yet it isn’t as simple as raising wages to solve a price problem. If we could simply vote ourselves richer, every country on earth would have done so long ago and we wouldn’t be having this discussion. The cost of living issue for those in work must be balanced against the continued high rate of unemployment among the hardest to help parts of the workforce. Is it either moral or practical to reduce the chance of the young or low-skilled unemployed getting a job in return for more buying power for those fortunate enough to have one already?

Second is an ideological belief in state involvement in wages and prices. This extends in the case of Shorthouse and BrightBlue to calling for the Minimum Wage to vary by “certain sectors and businesses” – a process which would presumably involve a major expansion of the Low Pay Commission. That would be a large extension of state economic power – moving from a system in which the Minimum Wage is set as a backstop to prevent abject poverty, to a system which seeks to determine the varying value of work in different industries and to manage the economy accordingly.

Third, and perhaps most powerful, is a desire to disrupt our critics’ assumptions about the Conservative Party. It is a desire this site shares, to discover ways in which we can shatter the negative stereotypes which prevent Conservative messages reaching voters to whom we ought to appeal.

Picking such ideas is a difficult job, though. Done properly, disruptive PR is about holding up something consistent with your principles but surprising to your critics. Simply surprising people, regardless of whether the vehicle to do so is right or wise, is a mistake. We ought to have learned this when, in Opposition, Cameron and Osborne committed their support to Labour’s unaffordable spending plans and the supposed consensus on crippling green taxes.

For all these reasons, a politically-driven rise in the Minimum Wage would be an error.

That is not to say it won’t happen. The combination of pressure to address the cost of living and the entirely justified desire to shake off the stereotypes attached to our party may well win the day in Downing Street.

If they do, then I fear we will be making a mirror image of the mistake of the 1990s; having over-reacted with excessive alarmism to the idea of a Minimum Wage at all, the Government may be about to swing the pendulum to the other extreme, harming the prospects of jobseekers and the interests of entrepreneurs in order to prove the Conservatives have changed.

There may be ways to strike a compromise, satisfying the concerns of those who want a rise while quelling the fears about the harmful impact it might have. When Labour proposed a Living Wage last year, they offered employers a tax cut if they chose to pay it – presumably driven by their own fears about voters’ stereotypes of their party.

Perhaps George Osborne could filch and adapt the idea; it wouldn’t be the first time. An increase in the Minimum Wage might be more sustainable, and carry fewer downsides, if the impact on employers was offset by a tax cut. Wouldn’t that be a more genuinely Conservative solution – cutting taxes to raise wages?

110 comments for: The pressure is on for a Minimum Wage rise – but is it the right thing to do?

Leave a Reply

You must be logged in to post a comment.