Many have been quietly celebrating the recent news of the minimum wage increase to £6.08 from £5.93. Introduced more than ten years ago, its aim is obvious: to protect those vulnerable to wages that are unsustainable to real life costs and standards.
It is one of the policies that the Liberal Democrats have strongly supported, having its increase, along with the Personal Tax Allowance (now £7,475), as a precept of their entry into the coalition. The continual increases in the minimum wage correspond to a realistic government attitude towards inflation of living costs. They show that the government understands what people need in order to survive, and that politicians are standing up to businesses seeking to exploit workers.
An employer could easily pay £3, £2 or less for an hour of your time…
It is a system that realises inequality in the workplace. You may think that £6.08 is a rather tawdry sum, but think of a world without it. An employer could easily pay £3, £2 or less for an hour of your time. But, then again, is it really improving people’s prospects? Yes, you cannot get paid under £6.08, if you’re over 21, but wages under this have been replaced with a world where workers are paid nothing but the value of experience for their time; a situation where thousands of young adults are working in unpaid internships all for the hope of getting onto salaried work.
On the face of it, businesses have been helped by a reduction in Corporation tax rates to help them through the recession; however Corporation tax is a yearly tax based on profit gained over the whole year, if there is no profit, which there normally isn’t because most businesses are in debt, there’s simply none to pay. On the other hand, stealth business taxes, specifically those that affect recruitment (PAYE and NIC), mean that SMEs (small and medium enterprises) have reduced their junior staff: PAYE and NIC have to be paid monthly which disastrously affect cash flows, and employers’ real ability to employ. Therefore, those staff that would’ve been cost-effective had the wage been £5.00 are seeing their duties swallowed up by workers a tier above, workers who managers can rely on to take on some extra responsibility without a pay rise.
Businesses are not instinctively philanthropic…
Before the recession, the national minimum wage was a successful policy, bolstered by support for a more life-realistic “London minimum wage”. After the recession, rising inflation, taxes and costs have limited employers from employing; this, I concede, is not always because companies’ managers are always looking to employ but really can’t, it is because they want to keep their wages and, therefore, lifestyle intact, by cutting other costs. Businesses are not instinctively philanthropic, and they are less so with rising costs and taxation.
Used in moderation, the national minimum wage is a policy that keeps some people above the poverty line; however this is highly dependent on regional problems and concerns. It would be far better to give this power to regional authorities so that in London it can be £6.08 and in Caerphilly it can be considerably less: have the minimum wage linked to average prices regionally. Moreover, get rid of PAYE and Income tax and merge them into a single tax that will be less detrimental to businesses and those getting into the world of work. It’s time the coalition government invested into making employment more attractive, replacing the lost revenue with tax increases on luxury goods and transport; the old argument of taxing the rich will make them leave just doesn’t make sense in a world replete with calls to increase tax revenues, employment and universal standards.
Keeping the current policy, as it is, may be morally correct, but it will deprive young people from getting into paid work, sustaining the job crisis and ruining our country’s future.