Government lays groundwork for slashing minimum wage

The Government has instructed the Low Pay Commission to consider the impact of the minimum wage on “employment and the economy”.

The Telegraph suggests that the government is considering freezing or cutting the minimum wage if it starts to cost jobs or damage the economy. Christopher Hope reports:

The minimum wage for millions of people could have to be capped or frozen in future if it risks damaging jobs or the economy, the Government has said.

It has told the Low Pay Commission, which sets the minimum wage, that it must formally consider its impact on “employment and the economy”, before agreeing future increases.

The change, which will be written into the Commission’s new terms of reference, raises the prospect of the first ever across-the-board freeze or cut in the minimum wage for everyone if the economic uncertainty continues.

Let's leave aside, for the moment, the fact that the minimum wage has risen below inflation – and thus faced an across-the-board cut in real terms – every year since the recession. The Low Pay Commission is, it seems, perfectly capable of examining the level of the minimum wage and deciding it's too high, and has done that four years in a row.

When you look at the actual history of the minimum wage in the UK since its introduction in 1999, the key thing that stands out is how few negative effects it has had at all. As Tory MP Matthew Hancock told the Resolution Foundation last week:

The standard argument against the minimum wage is that a minimum wage would price people out of jobs. But the academic analysis doesn’t back it up. The analysis of the impact of minimum wages is one of the most studied areas of economics.

There are so many studies that economists now publish studies of studies, bringing all the data together. Two of the most recent, which together analysed 91 studies, found that “the minimum wage has little or no discernible effect on the employment prospects of low-wage workers.”

Many reasons are cited by the study, including increased pay raising the efficiency of the workforce, and the very small impact of minimum wage increases on the total pay bill. After all, work is a team effort. Working out how much of a firm’s revenue is down to which member of the team is an imprecise art at best. Just as with high pay, the question of just rewards is important.

A phrase favoured by right-wing economists is that it is "economics 101 that the minimum wage increases unemployment". Going by the available evidence, it seems like there's a reason economics 101 is followed up by economics 201 and economics 301.

But while the information we have suggests that the Low Pay Commission has handled its task well, that doesn't mean we should ignore the possibility that a minimum wage set too high might damage employment. Indeed, that's clearly something the Low Pay Commission examines, as it explains the real-terms cuts coinciding with the recent spike in unemployment. The Government telling the Commission to "formally consider" employment and growth is just an emphasis on areas formerly implicitly covered.

But the minimum wage would have a strong rationale even if it did slight harm to growth and employment. After all, all expectations were that there would be a slight increase in unemployment after we introduced it in 1999, and although that didn't happen, it wouldn't have been the wrong decision if it did.

You can rationalise a minimum wage which slightly harms employment by asking what the role of the welfare state actually is. If it's to help people of low incomes across the board, then the key thing is to get everyone into work no matter how badly paid, and top their quality of life up to an acceptable level. If, conversely, it's a safety net to help those out of work, then there's not much to be said for the prospect of people in work still needing help. To put it in the Blairite language with which it was promoted, the minimum wage is about making work pay. If work doesn't pay, and is subsequently made unviable by a – still very low – minimum wage, then it's not the biggest hit ever taken.

Similarly, a slight hit to growth caused by the minimum wage can again work out OK, especially if redistributionist policies ensure that the paid from that hit is taken by the rich. Compare it, for instance, to tax. It is widely accepted that there is a deadweight loss to taxation – that is, the act of taxing people reduces their incomes by more than the amount of revenue received. Nonetheless, we do it, because we think it might be worth turning a pound in a rich person's pocket into 90p in the hand of someone poor. And the same is true of the minimum wage – the unambiguous winners of it are working poor people, and if the hit is taken by people richer than them, that might be a decision worth taking. Every policy has trade-offs, and requiring the minimum wage to have absolutely no negative effects is holding it to a standard no other policy could live up to.

The Government's instruction to the Low Pay Commission to do something they are already doing will hopefully remain just that. But if it becomes the start of a whispering campaign to suggest that minimum wage laws are making us all worse off, remember that they aren't; and that even if they were making some of us worse off, it might well be worth it given those whose lives they improve.

Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

A pro-union march in 2014. Photo: Getty
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The legacy of sectarianism is still poisoning the air of Scotland

Ruth Davidson has reinstated two Stirling councillors who posted anti-Catholic and racist messages on social media. That this kind of cretinous guff still goes on in my hometown in 2017 raises my hackles.

Kenny Dalglish was a bluenose: as a boy in the mid-60s, he and his father would make the short journey to Ibrox to cheer on Rangers, then Scotland’s most successful team. With the football allegiance came a cultural one, too. Or, probably, the other way round.

Wee Kenny could play a bit, obviously, and dreamed that his beloved Gers would sign him up. But, as Richard T Kelly writes in Keegan and Dalglish, his enjoyable new double biography of the two footballing greats, "Rangers had a certain preference for big lads, or else lads with an obvious turn of pace; and Dalglish, despite his promise, had neither of those easy attributes."

Rangers’ loss was Celtic’s gain, but it took some effort. The former, writes Kelly, "was the club of the Queen, the Union, Scotland’s Protestant majority… founded by Freemasons and members of the Orange Order, strongly tied to the shipyards of Govan. Glasgow Celtic was the team of Irish Catholic patriots, revolutionary Fenians and Home Rulers, begun as a charitable organisation… a means to bolster the faith and keep the flock out of the clutches of Protestant soup kitchens. It was going to be a serious step across a threshold for Dalglish to accept the overtures of Celtic."

In the end, Jock Stein dispatched his number two, the unhelpfully named Sean Fallon, to meet the young starlet’s family. "Fallon entered a domestic environment he felt to be 'a bit tense' -  a Rangers house, a lion’s den, if you will. Fallon even picked up the sense that Bill [Dalglish’s father] might rather his son pursue [an] apprenticeship in joinery."

The deal was done ("My dream was to become a professional footballer – the location was just a detail," Dalglish would later say) and the most gifted player Scotland has ever produced went on to make his reputation kitted out in green and white stripes rather than royal blue -  a quirk of those difficult times for which those of us classed as Fenian bastards rather than Orange bastards will be forever grateful.

Growing up in west and central Scotland, it was hard to avoid being designated as one type of bastard or the other, even if you supported a team outwith the Old Firm or had no interest in football at all. Thanks to 19th century immigration, the terrible religio-political divide of Ulster was the dominant cultural force even in Stirling, the town around 25 miles from Glasgow where I grew up and where I now live again. If you went to the Catholic school, as I did, you were a Fenian; if you went to the Proddy (officially, non-demominational) school, you were a Hun. You mostly hung around with your own, and youthful animosity and occasional violence was largely directed across the religious barricades. We knew the IRA slogans and the words to the Irish rebel songs; they had the UVF and the Red Hand of Ulster. We went to the Cubs, they went to the Boys’ Brigade. We got used to the Orange Walks delivering an extra-loud thump on the drums as they passed the chapel inside which we were performing our obligatory Sunday observance.

At the time – around the early and mid 80s – such pursuit of identity might not have been much more than a juvenile game, but it was part of something more serious. It was still the case that Catholics were unemployable in significant Scottish industries – "which school did you got to, son?" was the killer interview question if your answer began with "Saint". This included the media: in the late 90s, when I joined the Daily Record – the "Daily Ranger" to Celtic fans (its Sunday sister, the Sunday Mail, was known to Rangers fans as the "Sunday Liam") – vestiges of this prejudice, and the anecdotes that proved it, were still in the air.

The climate is undoubtedly better now. Secularisation has played its part - my own daughters attend non-denominational schools – even if, as the sportswriter Simon Kuper has observed, many are "not about to give up their ancient traditions just because they no longer believe in God". The peace process in Northern Ireland and important gestures such as the late public friendship between Ian Paisley Sr and Martin McGuinness have made a difference. And I suppose the collapse of Rangers as a footballing force, amid financial corruption that saw them dumped into the bottom tier of Scottish football, helped.

But the sensitivity remains. The 2014 Scottish independence referendum broke down in part across tribal lines, with many Celtic supporters, once Labour, now SNP, loudly backing a Yes vote, while Rangers fans were on the No side. The prospect of Brexit creating a significant border between the north and south of Ireland, which could inflame recently and shallowly buried tensions, makes one shudder. And even locally, the old enmities continue to raise their grubby heads. Ruth Davidson, leader of the Scottish Tories, is currently taking flak for allowing the reinstatement of two Stirling councillors who had posted anti-Catholic and racist messages on social media prior to their election. The pair have apologised and agreed to take part in diversity training, but I confess that this kind of cretinous guff still goes on in my hometown in 2017 raises my hackles. The rawness remains.

That this is so was brought to me a few years ago when I filed a column containing the word ‘sectarianism’ to a Scottish newspaper. Though the context had nothing to do with Catholic/Protestant or Celtic/Rangers, the editor asked me to remove it. "It’ll be deliberately misunderstood by one side or the other, and probably both," he said. "It’s not worth the hassle. In Scotland I’m afraid it never is."

Chris Deerin is the New Statesman's contributing editor (Scotland).