Tuesday, 9 November 2010

Benefits and Wages

One of the mantras of the current UK Government is that work should pay more than welfare, so that living on benefits is not a choice which leaves people better off than seeking work.  It’s hard to disagree with the principle, but as any good mathematician would know, if A>B, there are two ways of reversing the sign, not just one.
Leaving aside for the time being the not inconsiderable problem that if there are no jobs available, then effectively B=0, the other problem with the government’s approach is that they have sought to concentrate entirely on reducing the benefit side of the relationship.  One of the better decisions of the previous government was the introduction of a minimum wage; but the fact that leaving benefits to take a job at the minimum wage doesn’t pay for a number of people highlights the inadequacy of the level at which the minimum was set.
There is always scope to review benefits to make sure that they are set at a suitable level, but there is also scope for making sure that the minimum wage paid to those people in work is set at a level which ensures that work really does pay.  Setting the wage at a level which means that people receiving it have an income below the officially defined poverty line contributes directly to the imbalance.
Employers and businesses will object, naturally.  They objected to the minimum wage in the first place as well.  But I simply don’t believe that large numbers of businesses are only viable if they are allowed to underpay their employees.


Plaid Panteg said...


Good post.

I wrote about this ages ago. It is rather telling the tories never look at low wages being the problem.

Spirit of BME said...

I can not see the minimum wage surviving and it should not. Staying on dependency or getting a job that pays more has always acted as a minimum wage mechanism.
Dumping this rather strange interference in the market will stimulate job growth, but the economic environment is not the same throughout the realm owing to the tax laws which HMG in London insist on controlling. A restored Welsh government will I trust allow these taxes to be set by the States rather than the Federal Government in Cardiff.

Unknown said...

"I can not see the minimum wage surviving and it should not."

It will survive and it should.

Complete nonsense.

Taxpayer bailouts are a "strange interference in the market" too, fancy dumping them? I wouldn't.

Anonymous said...

In the year preceeding the introduction of the minimum wage in Pembrokeshire there was a reduction in the local seasonal wage rate from £3.00 per hour to £2.75 per hour with active consent from the Job Centres. Those seeking full time employment were continually the victims of those only wanting short term casual employment in many cases beer money for the weekend

This was no doubt intended to give seasonal employers a good year in advance of the minimum wage introduction which was believed at the time to be likely to reduce their profitabilty

Fast forward in recent years the minimum wage is seen as the norm but there is a hidden agenda in that employers reduce hours to below what is considered full time or part time by the State leaving the taxpayer to pick up the tab This puts those seeking serious employment up against 1. those who who are simply doing it for the beer money and 2. those who make the minimum effort in work in the safe knowledge that that their effort will be topped up by the State

This is of course outside the scenario of those who earn ? more by not working than they would ever earn by working therefore have no intantion of working

Cibwr said...

And its worth me repeating what I said on the Plaid Panted blog....

We used to have wage councils - introduced by Churchill because bad employers drove wages down for good employers. Their pay rates were modest - but they were supposed to be a living wage. The varied sector to sector but were an excellent safety net. Thatcher's government abolished them.

Back in the 19th century a security system paid for by ratepayers topped up wages for the low waged to a basic living wage. Look it up - it was called the Speenhamland System see: http://en.wikipedia.org/wiki/Speenhamland_system. It resulted in employers (mainly in agriculture) to cut the wages of the poor.

The current minimum wage is both too low and also has a disgraceful built in system of discrimination, one based on age and not ability. Why should a 16 or 18 year old worker be paid less than an older worker at the same skill level?

If all fast food places had to pay a living wage, somewhat higher than they do now then there would be a level playing field as all similar establishments would be under same requirements.

John Dixon said...


Your point about some employers offering fewer hours is a good one, and is a practice employed even by some major household names.

The minimum wage is unquestionably set too low, and the rules around it need further tightening to ensure that there are no loopholes.

Calling for the abolition of 'red tape' is a long-time favourite of politicans (of all parties sadly), but without defining what exactly they mean by the phrase it's a very dangerous thing to support. One person's 'red tape' is very often another person's protection, and some of those calling for the abolition of 'red tape' are doing so in order to give unscrupulous employers carte blanche to reduce wages or worsen terms and conditions in other ways. I don't doubt that for some politicians, all the legislation around minimum wages is part of what they mean by 'red tape'.