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George Osborne: Minimum wage rise must not cost jobs

9 January 2014

Amid continuing confusion on what on earth the Tories do think about raising the minimum wage, George Osborne has had a go at clarifying things. He has just told Sky News:

‘Well look, I think everyone wants to see an increase in the minimum wage. I’d like to see an increase in the minimum wage, but it has to be done in a way that doesn’t cost people their jobs, because that would be self-defeating and we have the Low Pay Commission as a body that exists to make exactly that judgement, and what we’ve got to do as a country is get that balance right between supporting business, growing our economy and making sure it’s a recovery for all and that is what our long term plan is all about delivering.’

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Oddly, this is being written up as ‘Chancellor rules out big rise in minimum wage’ when this isn’t quite the case. He started out by saying ‘I’d like to see an increase in the minimum wage’ before saying that any rise couldn’t cost jobs, which even those on the left acknowledge (which is why Ed Miliband has made his support for a living wage about encouraging firms through tax breaks and social pressure to raise wages, rather than raising the minimum wage level to match the living wage across the board).

The key sentence in this short clip is it has to be done in a way that doesn’t cost people their jobs, which might be a hint at the plan reported by the Mail for tax breaks for firms to ease the blow of a higher hourly rate. This, incidentally, is not a million miles away from the tax breaks that Miliband has been mooting for a while for firms who pay the living wage, which might lead some in the party to despair that David Cameron and co are now outsourcing their policymaking to the Labour party (see Douglas Carswell’s post for us on the importance of a party having the courage of its convictions). The Chancellor clearly wants to signal that he’s not just going to hand out expensive goodies in the run-up to the election as he wants to show that fiscal discipline is the cornerstone of his approach to the economy. But he’s not ruling a rise out by any means.

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  • Daniel Maris

    You can’t look at minimum wage in isolation – that makes no sense.

    Unemployment is one of the defining characteristics of the capitalist system. There was never any real unemployment prior to the emergence of capitalism as a way of organising production. There is plenty of evidence that employers like unemployment and want there always to be a pool of reserve labour.

    We have seen the damage that unemployment does in terms of poverty, welfare dependency, mental health problems and addiction.

    We should raise the minimum wage but we should also put in place an employment guarantee system, so that anyone who is not picked by the jobs market has an opportunity to earn and to contribute something to society.

    • CortUK

      Oh bless. Did you win the school election?

      The chap who won my school election in May 1997 – on a socialist ticket – is now on over 500k in the City…..

  • CortUK

    I’d rather Friedman’s negative interest rate. Simple, easy idea that work should pay.

    • Daniel Maris

      Simple? Easy? You are a very credulous type aren’t you?

      • CortUK

        Oops. I meant a negative income tax rate.

        Freudian slip……

        • Daniel Maris

          I must admit I was struggling to see how the negative interest rate applied to this directly, though I do think you can’t look at minimum wage in isolation. Negative income tax rate is not a thoroughly idea but not good enough I feel.

          I prefer a combination of flat rate income tax (on all income – no allowances), (true) universal credit and a raised property tax to make good any fall in revenue from income tax.

  • AnotherDave

    Even if raising the minimum wage doesn’t put companies out of business, because it’s offset by a reduction in taxation, it will still cost low-skilled workers _their_ jobs. They’ll lose out to stronger candidates.

  • Magnolia

    Our governments support low wages through tax credits, housing benefit, child benefit, help to buy etc. and now tax breaks because low wage earners cannot afford to feed and house themselves and their families without state aid.
    This means in effect that the government chooses to support low paying jobs through the tax and benefit system.
    We all knew that the state was lousy at picking winners but this takes some beating.
    If we had a living, minimum wage (eventually after a prolonged period of adjustment, under careful supervision) and no working state benefits/tax breaks then the population would eventually acquire the most successfully useful skills for themselves because both they and all of us would depend on it.
    The change would evolve naturally because employers would have to train and manage the workforce so that it was successful enough to justify the living wage in this country and those occupations which did not justify the wage would go.
    This could not work with huge amounts of open immigration.
    John Redwood quite rightly says that immigration suppresses wages in certain circumstances.
    We have a choice between a race to the bottom for the majority and eventual social chaos or a different system which balances the needs of the workers with the needs of the employers within a framework where the state balances the needs of the tax-payers with the right to personal freedom and family life.

    It’s just an idea.

  • HookesLaw

    What is odd about journalists putting their own spin on what someone says to totally misrepresent it?
    What is clear is that if Mr Nelson has his way then any journalist who does misrepresent what we say then it will not be an independent legally binding tribunal that makes any judgement on the matter.

  • alabenn

    The reason that the jobless rate did not soar during the slowdown was because they kept wages down, it is probably to early for that policy to be jettisoned, the election will be over before the chickens from this come home to roost.
    That he stiffs Wallace is a good thing so he should get on with it, if he loses the election it will happen anyway, unemployment is not something Labour really cares about, union members unemployment is what drives their policy.

    • dalai guevara

      Boom and bust. Forever the same mistakes ‘occur’. We just cannot prepare for failure, can we?

      In a prolonged period of bust, profits fall, earnings fall, education is no longer afforded, CEA is capped, qualifications aquired fall.

      Enter the boom phase, where are employers going to find the skills they require? They will import them (!)

      We’ve seen it in the Eighties, we’ve seen it in the Mid-Nineties, we will eventually observe it happening again. No, we just cannot prepare for failure and behave anti-cyclical.

      • alabenn

        If you remove the import option things will change, employers will have to go elsewhere or train people up, if they went else where would the current unemployed be any worse off.

        • dalai guevara

          Why remove the import option for the (highly) skilled? Everyone is after the highly skilled. What countries actually end up with is an entirely different matter.

  • BigAl

    Ensure people are paid a fair wage and get rid of the tax credit handouts!

    • Alexsandr

      how do you ‘ensure’ this?
      do you remember the prices, wages and income board in the 70’s
      that went well….

    • Tom M

      “Ensure people are paid a fair wage”. So just how do you do that then? Is it £20K or £25K per annum?
      I had this discussion with a university lecturer friend of mine (very left wing) who employs people from time to time to put her literature into Harvard order.
      “So do you pay them the minimum wage” I asked.
      “No I always pay a bit more” she said sanctimoniously.
      “So what happens if the employee doesn’t agree that it is enough and it is unfair to do this work for what you offer?”
      “I’ll get someone else in that case” she said.
      “Why wouldn’t you give the employee a living wage” I asked
      “I couldn’t afford that much” she said.

      Putting a minimum wage on work ignores what work is supposed to be. In selling your labour you are selling a commodity like any other. It has a market value at a time and a place.
      The more you up the minimum wage the more jobs are made impossible to finance.
      Two recent examples spring to mind. I visited a small stately home during the summer. The guide explained the gate receipts were too small and couldn’t pay a wage so could we donate a tip to cover her expenses.
      The second, a lady teaching English as a second language at a night school. As in the previous example the employment costs far exceeded any realistic income so she too asked for voluntary contributions.

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