Better pay, but only for some

Observations on the minimum wage

Almost everyone except the most diehard economic conservatives now accepts that the national minimum wage - for which the government has just announced a rise, as well a new £3 hourly rate for 16- to 18-year-olds - has had absolutely no negative impact on business or jobs. Rises in the adult minimum wage have run at more than twice the rate of general pay increases in the economy. By spring 2003, only 260,000 workers, just 1 per cent of all jobs, were being paid below the minimum wage.

So can we celebrate Britain leaving behind the bad old days of exploitative low pay for the most vulnerable? Not quite. The 1 per cent figure (probably mainly the under-18s, who were exemp-ted until now) refers to the official labour market. Nobody really knows how many companies pay less and get away with it. The government points to the lack of a single criminal prosecution for flouting minimum-wage legislation as evidence of its success in enforcing compliance. It is hard to take this at face value.

Dwarfing the £3.5m which the Inland Revenue won back in arrears in 2002-2003 from companies that failed to pay the minimum wage is the estimated value of work in the black economy: £80bn. That was some years ago - more recently, the government admitted that it has no idea what the black economy is really worth. Nobody knows how many British citizens are working in this "informal sector" alongside the illegal migrants who became so tragically visible at Morecambe Bay.

David Blunkett, the Home Secretary, says he "hasn't got a clue" how many failed asylum-seekers are living or working in Britain. But the director of a recruitment agency in Warsaw recently gave a pointer. Trying to assuage British fears of a flood of new workers when eight eastern European states join the EU on 1 May, he said: "I don't think you have too much to worry about as far as Poland is concerned. Anyone who really wants to work in Britain is there already."

Blunkett says he will back a private member's bill from Jim Sheridan that would force gangmasters to meet minimum-wage and legal working conditions for those under their control. But though it could help deter the cruellest of the slave labourers, it will not eradicate low pay even if it becomes law. Our fast-growing economy relies heavily on a phantom army of low-paid, unregulated and unprotected workers, without whose sweat our productivity rate would be even lower. And the government boasts on its trade and investment website that "total wage costs in the UK are among the lowest in Europe". The rise in the minimum wage and its extension are good news. But not for everybody.