The Guardian view on the national living wage: not the end but the beginning
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Version 0 of 1. Summer 2020: straight after a general election that has delivered his party an upset slim majority, new chancellor John McDonnell delivers a huge rise in the minimum wage over each of the next five years so that the lowest-paid workers from Tyneside to the Wirral are much better off. You can imagine the likely reaction. Conservatives decry the Marxist opposite. Economists tut about the innumerate driving a coach and horses through the established independent process for setting the minimum wage. The business lobby go puce with anger about what this will do to company bottom lines. The rightwing press runs story after story about the care homes and local councils going bust thanks to the dangerous socialist in Number 11. Well, imagine no longer – it’s already happened. Except the chancellor in question was not some Labour hopeful, but that tonsured apostle of neoliberalism, George Osborne, in his emergency budget straight after last year’s surprise election victory. And it all starts this Friday, when workers over 25 years of age on the minimum wage see a rise in their pay packets of 50p per hour. It continues going up over the next four years, from £7.20 to at least £9 an hour. By 2020, nearly one in four employees are likely to have received some boost to their wages thanks to that one move by Mr Osborne. This was the same budget in which the Conservatives heaped further obligations on firms to fund training, and went after both non-doms and buy-to-let landlords. Of course, it’s not quite as straightforward as that, but consider: a member of the same party that bitterly opposed the very introduction in 1998 of the minimum wage and warned it would destroy up to 2 million jobs is now responsible for its fastest-ever rise. That makes this phase of the minimum wage not just a fascinating economic experiment, but a political one, too. Mr Nixon, China awaits. Even this isn’t enough for Mr Osborne, who is the sort who cannot hear the epithet “too clever by half” without appealing for an upgrade. The chancellor calls his new wage rate the National Living Wage. It is no such thing. The Living Wage is set according to how much a household needs to make ends meet, and is far higher than even the Osborne-boosted rate: £9.40 an hour in London, £8.25 outside. Nor is it the old minimum wage, set according to “what the market will bear”. Instead, the chancellor wants his new pay rate to rise over time to 60% of the median salary. While doing so, he will hack £12bn from social security – hitting the working poor hardest. Forming in front of our eyes is a Conservative version of the future of low-paid workers: receiving much less in benefits and monitored even more closely by government but getting paid more. Yet the huge problem of low pay in the UK requires much more than a slightly more generous rate mandated by Whitehall – and that is where Mr Osborne’s policy falls so far short as to bring into doubt his sincerity in tackling it. First, the people who will gain most from this are not lone parents or young singles. Instead, many of those on minimum wage are second earners in a well-off household (one a well-paid lawyer, say, the other a teaching assistant). Combine that fact with the staggeringly regressive impact of Mr Osborne’s other tax and benefit changes and you end up with the unfairness pointed out by the independent Resolution Foundation in which, even after this Friday’s payrise, a low-earning couple with three children could be £3,000 a year worse off. Second, low pay reflects both power imbalances in the workforce and inequality between the high-paid south-east and the rest of the country – neither of which this government is doing anything meaningful about. For decades, trade unions in Germany rejected the very idea of a minimum wage – why did they need one when they sat on company boards and negotiated good pay rises for their members? It is only with the growth of a low-paid workforce even there that Europe’s biggest economy last year brought in a minimum wage. Workers on poverty pay in the UK not only have to worry about how to afford to eat and heat and rent their homes, but also whether they will get enough hours tomorrow, or next week. Meanwhile, ministers refuse to recognise abuse of zero-hours contracts as a serious problem. The new minimum wage is a small step in the right direction – but does it take Britain towards being a high-wage, high-productivity economy? Mr Osborne doesn’t appear to have that even as a goal. |