Minimum wage: The only way is up?

On Britain’s low paid workers.

Tomorrow sees a 15 pence per hour pay rise for Britain's lowest paid workers. Of course, every penny helps, but don't expect to hear much gratitude. With RPI inflation running at 5.2 per cent, this year's VAT increase still being absorbed, tax credits being stripped back and any number of other pressures on the cost of living, this year's increase won't allow Britain's low paid to stand still, never mind move forward. The best that can be said is they will be getting poorer (given inflation) at about the same rate as those on average pay.

But before we rush to judgement on this apparently stingy increase, bear in mind that the Low Pay Commission (LPC), which oversees increases in the minimum wage, had a truly tricky job on its hands. Given anaemic growth and rising unemployment it's no surprise that they decided to err on the side of caution -- they couldn't risk making a tough labour market worse.

Whether or not precisely the right balance was struck this year, now is a good moment to consider the role the minimum wage has played in lifting living standards to date, and what more it might do in the future. Turn back the clock fifteen years and there were of course plenty of doom mongerers predicting the devastating impact on jobs if workers were unlucky enough to be afforded protection through a legal wage floor. Things turned out differently. As an authoritative study of the experience of the minimum wage to date concluded: "there is little or no evidence of any employment effects". Even those groups who were thought to be most vulnerable don't appear to have experienced a negative effect -- indeed the National Institute for Economic and Social Research recently found that employment rates are actually higher for those aged 22 (who get the full minimum wage) compared to those who are 21 (who get a lower rate), as the higher wage appears to have drawn more of them into work.

Nor can we put these findings down to the fact that the minimum wage has been pegged at rock-bottom levels. If we look at the period from its inception in 1999 up to 2010 it went up by around 65 per cent; massively outstripping CPI inflation (25 per cent) and RPI inflation (37 per cent), as well as out-performing median pay (hence the gap between those on low pay and those in the middle has fallen modestly).

At a time when most forces in our economy have been serving to squeeze the share of income going to the bottom, the minimum wage has pushed back in the other direction.

And there is evidence that the minimum wage may have benefited many people who actually get paid above the legal rate. A pay raise at the bottom can have a knock-on effect on those slightly higher up the earnings ladder, as these workers seek to protect their earnings relative to those below them. The implication is that many modestly paid workers may indirectly (and probably unknowingly) have benefited from the minimum wage.

We also know following a recent study that those firms and sectors most affected by the minimum wage have experienced significant increases in productivity as a result. Businesses don't just meekly absorb higher wages: they seek to change working patterns and investment decisions to enable them to succeed given higher costs (though admittedly larger firms find this easier than smaller ones). The Low Pay Commission was pipped to the post in arriving at this finding by a certain Sidney Webb who had precisely this insight a century ago -- armed with little more than economic intuition and precise prose, rather than today's econometric models.

In a world where few policies have a straightforwardly positive impact -- where even apparently benign measures often have malign side effects -- the minimum wage stands out as something of an exception. Its success is all the more noteworthy given that it embodies many of the attributes that, according to the current zeitgeist, make for Bad Policy. Regulation not de-regulation. National not local. Top-down not bottom up. Overseen by corporatist committee not small platoon. It has all the perfect characteristics to make it the pantomime villain in today's Whitehall.

Yet given its record, all parties feel the need to proclaim support (even if there is some sniping from the Conservative right).

Despite this apparent consensus there are still questions to ask about its future role. Over recent years the level of the minimum wage has fallen backwards relative to that of median earnings. Indeed, as the chart below shows, if we wanted the lowest paid in Britain simply to recover the ground they've lost relative to the "middle" since 2007, we'd need to see a steep climb in minimum pay over the next few years -- and all this in a period when overall wages are not expected to go up by much.

 

Whether or not this is remotely tenable obviously depends in large part on what happens in the wider economy. If we slip into another recession then calls for a rapidly rising minimum wage will be given short shrift. But if that doesn't happen, and the jobs market gradually recovers, this will itself prompt an important question: should the minimum wage really just be about maintaining a wage-floor in the difficult decade ahead, or should it seek to ensure that, at the least, Britain's low paid workers don't fall further behind everyone else? This question is likely to grow in salience.

For in an era of mounting cuts to tax credits for those in work, if the minimum wage doesn't play this wider role, it's not clear what else will.

Gavin Kelly is a former Downing Street adviser to Gordon Brown and Tony Blair. He tweets @GavinJKelly1.

Getty Images
Show Hide image

Is there such a thing as responsible betting?

Punters are encouraged to bet responsibly. What a laugh that is. It’s like encouraging drunks to get drunk responsibly, to crash our cars responsibly, murder each other responsibly.

I try not to watch the commercials between matches, or the studio discussions, or anything really, before or after, except for the match itself. And yet there is one person I never manage to escape properly – Ray Winstone. His cracked face, his mesmerising voice, his endlessly repeated spiel follow me across the room as I escape for the lav, the kitchen, the drinks cupboard.

I’m not sure which betting company he is shouting about, there are just so many of them, offering incredible odds and supposedly free bets. In the past six years, since the laws changed, TV betting adverts have increased by 600 per cent, all offering amazingly simple ways to lose money with just one tap on a smartphone.

The one I hate is the ad for BetVictor. The man who has been fronting it, appearing at windows or on roofs, who I assume is Victor, is just so slimy and horrible.

Betting firms are the ultimate football parasites, second in wealth only to kit manufacturers. They have perfected the capitalist’s art of using OPM (Other People’s Money). They’re not directly involved in football – say, in training or managing – yet they make millions off the back of its popularity. Many of the firms are based offshore in Gibraltar.

Football betting is not new. In the Fifties, my job every week at five o’clock was to sit beside my father’s bed, where he lay paralysed with MS, and write down the football results as they were read out on Sports Report. I had not to breathe, make silly remarks or guess the score. By the inflection in the announcer’s voice you could tell if it was an away win.

Earlier in the week I had filled in his Treble Chance on the Littlewoods pools. The “treble” part was because you had three chances: three points if the game you picked was a score draw, two for a goalless draw and one point for a home or away win. You chose eight games and had to reach 24 points, or as near as possible, then you were in the money.

“Not a damn sausage,” my father would say every week, once I’d marked and handed him back his predictions. He never did win a sausage.

Football pools began in the 1920s, the main ones being Littlewoods and Vernons, both based in Liverpool. They gave employment to thousands of bright young women who checked the results and sang in company choirs in their spare time. Each firm spent millions on advertising. In 1935, Littlewoods flew an aeroplane over London with a banner saying: Littlewoods Above All!

Postwar, they blossomed again, taking in £50m a year. The nation stopped at five on a Saturday to hear the scores, whether they were interested in football or not, hoping to get rich. BBC Sports Report began in 1948 with John Webster reading the results. James Alexander Gordon took over in 1974 – a voice soon familiar throughout the land.

These past few decades, football pools have been left behind, old-fashioned, low-tech, replaced by online betting using smartphones. The betting industry has totally rebooted itself. You can bet while the match is still on, trying to predict who will get the next goal, the next corner, the next throw-in. I made the last one up, but in theory you can bet instantly, on anything, at any time.

The soft sell is interesting. With the old football pools, we knew it was a remote flutter, hoping to make some money. Today the ads imply that betting on football somehow enhances the experience, adds to the enjoyment, involves you in the game itself, hence they show lads all together, drinking and laughing and putting on bets.

At the same time, punters are encouraged to do it responsibly. What a laugh that is. It’s like encouraging drunks to get drunk responsibly, to crash our cars responsibly, murder each other responsibly. Responsibly and respect are now two of the most meaningless words in the football language. People have been gambling, in some form, since the beginning, watching two raindrops drip down inside the cave, lying around in Roman bathhouses playing games. All they’ve done is to change the technology. You have to respect that.

Hunter Davies is a journalist, broadcaster and profilic author perhaps best known for writing about the Beatles. He is an ardent Tottenham fan and writes a regular column on football for the New Statesman.

This article first appeared in the 05 February 2015 issue of the New Statesman, Putin's war