Planning for a pay rise – could 'forward guidance' work for Britain’s low paid workers?

The Low Pay Commission should consider setting out how the minimum wage would increase over time if the recovery is sustained.

How will the low paid fare should the economy move into a period of steady growth? This question is already creating interest across all three parties and looks set to become ever more central to the 2015 election - especially if living standards continue to decline at the same time as growth picks up.

So we can expect there to be more interest in the nuts and bolts of how the minimum wage is set and whether it is likely to rise much over the medium term. Given that the wage floor has already fallen back below the level it was at in 2004, there are some who would favour an immediate hike, perhaps up to the level of the Living Wage, regardless of the fragility of the labour market. Many others worry about the impact of a higher minimum wage on unemployment (even if it is falling a bit) and future job growth. Faced with these competing pressures, policy-makers remain locked-in to the status quo in which the Low Pay Commission (LPC) takes an evidence-based, incremental, and typically cautious look at the level of the wage floor every 12 months.

One possible route through this bind would be to set out how the minimum wage would increase over time if, and only if, the recovery is sustained. If this sort of conditional approach towards policy-making sounds familiar it’s probably because it echoes the much hyped ‘forward guidance’ for monetary policy which has been introduced by Mark Carney at the Bank of England.

In relation to low pay, forward guidance could mean the LPC setting out the path of future increases in the minimum wage over a number of years so long as the recovery is maintained and unemployment falls. If, however, the economy weakens the LPC would revert to setting the minimum wage a year at a time. This approach would mean a shift from the established pattern of annual uplifts but it wouldn’t be wholly exceptional (the LPC has in the past set out its intention to increase the minimum wage above average earnings over a number of years).

What might be the upside of this sort of approach? Well, it could give the lowest paid workers some much needed confidence that they won’t be locked out of any recovery. It would also give employers far greater certainty over the size of the wage pressures they would need to absorb over the medium term. And, politically, it would be used as a way of demonstrating that the low paid will share in growth whilst also providing an escape route should the economy flat-line again.

Easy, then? No – this would be tricky to get right.

There would be wage-disappointment, or more likely wage-rage, if the economy under-performs and the promised increases in the wage floor fail to materialise. A broken promise (as it would be seen) of a pay-rise that fails to show up may well be worse than receiving no such promise in the first place. Employer groups would doubtless blanch at what will inevitably look like chunky increases over the medium term. And, as Mr Carney’s critics have pointed out in relation to monetary policy, there is no such thing as a perfect proxy measure which can reliably be used as a good guide as to whether or not the recovery is robust.

More specifically, if the LPC set out cash figures for the future level of the minimum wage over a number of years then this would effectively mean that the lowest paid workers in the land would be bearing the risk of inflation rising faster than forecast – hence the future increases might need to be set out as rises relative to inflation (which isn’t so easy to communicate). And, if it looked too much like the government was leaning on the Low Pay Commission, seeking to muscle it into increases that it didn’t want to make, then some members may walk away altogether, which could destabilise an institution that has served us well.

Yet for all these challenges, this and other ideas on how best to tackle low pay need to be very carefully looked at. Objections will be raised against any proposal that leads to an increase in the wage floor, many of them coming from the very same people who opposed its introduction in the first place. Fifteen years on, it’s time to consider where next for the minimum wage and to interrogate these and other ideas that could help make it relevant to the decade ahead (as a Resolution Foundation project is doing).

Despite the rhetoric coming from all sides, there is a real risk that interest in improving the plight of the low paid fails to translate into workable policy ideas that will improve the wages of many of those at the sharp end. As things stand, any recovery could all too easily pass them by. Maybe it’s time to plan for a pay-rise. 

Council workers from the Unison union picket outside Manchester Town Hall. Photograph: Getty Images.

Gavin Kelly is a former adviser to Downing Street and the Treasury. He tweets @GavinJKelly1.

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Theresa May’s stage-managed election campaign keeps the public at bay

Jeremy Corbyn’s approach may be chaotic, but at least it’s more authentic.

The worst part about running an election campaign for a politician? Having to meet the general public. Those ordinary folk can be a tricky lot, with their lack of regard for being on-message, and their pesky real-life concerns.

But it looks like Theresa May has decided to avoid this inconvenience altogether during this snap general election campaign, as it turns out her visit to Leeds last night was so stage-managed that she barely had to face the public.

Accusations have been whizzing around online that at a campaign event at the Shine building in Leeds, the Prime Minister spoke to a room full of guests invited by the party, rather than local people or people who work in the building’s office space.

The Telegraph’s Chris Hope tweeted a picture of the room in which May was addressing her audience yesterday evening a little before 7pm. He pointed out that, being in Leeds, she was in “Labour territory”:

But a few locals who spied this picture online claimed that the audience did not look like who you’d expect to see congregated at Shine – a grade II-listed Victorian school that has been renovated into a community project housing office space and meeting rooms.

“Ask why she didn’t meet any of the people at the business who work in that beautiful building. Everyone there was an invite-only Tory,” tweeted Rik Kendell, a Leeds-based developer and designer who says he works in the Shine building. “She didn’t arrive until we’d all left for the day. Everyone in the building past 6pm was invite-only . . . They seemed to seek out the most clinical corner for their PR photos. Such a beautiful building to work in.”

Other tweeters also found the snapshot jarring:

Shine’s founders have pointed out that they didn’t host or invite Theresa May – rather the party hired out the space for a private event: “All visitors pay for meeting space in Shine and we do not seek out, bid for, or otherwise host any political parties,” wrote managing director Dawn O'Keefe. The guestlist was not down to Shine, but to the Tory party.

The audience consisted of journalists and around 150 Tory activists, according to the Guardian. This was instead of employees from the 16 offices housed in the building. I have asked the Conservative Party for clarification of who was in the audience and whether it was invite-only and am awaiting its response.

Jeremy Corbyn accused May of “hiding from the public”, and local Labour MP Richard Burgon commented that, “like a medieval monarch, she simply briefly relocated her travelling court of admirers to town and then moved on without so much as a nod to the people she considers to be her lowly subjects”.

But it doesn’t look like the Tories’ painstaking stage-management is a fool-proof plan. Having uniform audiences of the party faithful on the campaign trail seems to be confusing the Prime Minister somewhat. During a visit to a (rather sparsely populated) factory in Clay Cross, Derbyshire, yesterday, she appeared to forget where exactly on the campaign trail she was:

The management of Corbyn’s campaign has also resulted in gaffes – but for opposite reasons. A slightly more chaotic approach has led to him facing the wrong way, with his back to the cameras.

Corbyn’s blunder is born out of his instinct to address the crowd rather than the cameras – May’s problem is the other way round. Both, however, seem far more comfortable talking to the party faithful, even if they are venturing out of safe seat territory.

Anoosh Chakelian is senior writer at the New Statesman.

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