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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The deafening killer - why noise will be the next great pollution scandal

A growing body of evidence shows that noise can have serious health impacts too. 

Our cities are being poisoned by a toxin that surrounds us day and night. It eats away at our brains, hurts our hearts, clutches at our sleep, and gnaws at the quality of our daily lives.

Hardly a silent killer, it gets short shrift compared to the well-publicised terrors of air pollution and sugars food. It is the dull, thumping, stultifying drum-beat of perpetual noise.

The score that accompanies city life is brutal and constant. It disrupts the everyday: The coffee break ruined by the screech of a line of double decker buses braking at the lights. The lawyer’s conference call broken by drilling as she makes her way to the office. The writer’s struggle to find a quiet corner to pen his latest article.

For city-dwellers, it’s all-consuming and impossible to avoid. Construction, traffic, the whirring of machinery, the neighbour’s stereo. Even at home, the beeps and buzzes made by washing machines, fridges, and phones all serve to distract and unsettle.

But the never-ending noisiness of city life is far more than a problem of aesthetics. A growing body of evidence shows that noise can have serious health impacts too. Recent studies have linked noise pollution to hearing loss, sleep deprivation, hypertension, heart disease, brain development, and even increased risk of dementia.

One research team compared families living on different stories of the same building in Manhattan to isolate the impact of noise on health and education. They found children in lower, noisier floors were worse at reading than their higher-up peers, an effect that was most pronounced for children who had lived in the building for longest.

Those studies have been replicated for the impact of aircraft noise with similar results. Not only does noise cause higher blood pressure and worsens quality of sleep, it also stymies pupils trying to concentrate in class.

As with many forms of pollution, the poorest are typically the hardest hit. The worst-off in any city often live by busy roads in poorly-insulated houses or flats, cheek by jowl with packed-in neighbours.

The US Department of Transport recently mapped road and aircraft noise across the United States. Predictably, the loudest areas overlapped with some of the country’s most deprived. Those included the south side of Atlanta and the lowest-income areas of LA and Seattle.

Yet as noise pollution grows in line with road and air traffic and rising urban density, public policy has turned a blind eye.

Council noise response services, formally a 24-hour defence against neighbourly disputes, have fallen victim to local government cuts. Decisions on airport expansion and road development pay scant regard to their audible impact. Political platforms remain silent on the loudest poison.

This is odd at a time when we have never had more tools at our disposal to deal with the issue. Electric Vehicles are practically noise-less, yet noise rarely features in the arguments for their adoption. Just replacing today’s bus fleet would transform city centres; doing the same for taxis and trucks would amount to a revolution.

Vehicles are just the start. Millions were spent on a programme of “Warm Homes”; what about “Quiet Homes”? How did we value the noise impact in the decision to build a third runway at Heathrow, and how do we compensate people now that it’s going ahead?

Construction is a major driver of decibels. Should builders compensate “noise victims” for over-drilling? Or could regulation push equipment manufacturers to find new ways to dampen the sound of their kit?

Of course, none of this addresses the noise pollution we impose on ourselves. The bars and clubs we choose to visit or the music we stick in our ears. Whether pumping dance tracks in spin classes or indie rock in trendy coffee shops, people’s desire to compensate for bad noise out there by playing louder noise in here is hard to control for.

The Clean Air Act of 1956 heralded a new era of city life, one where smog and grime gave way to clear skies and clearer lungs. That fight still goes on today.

But some day, we will turn our attention to our clogged-up airwaves. The decibels will fall. #Twitter will give way to twitter. And every now and again, as we step from our homes into city life, we may just hear the sweetest sound of all. Silence.

Adam Swersky is a councillor in Harrow and is cabinet member for finance. He writes in a personal capacity.