Wilf Stevenson on the irony of the proposed National Living Wage
The government is bringing its regulations on the new National Living Wage (NLW) to the House of Lords today. Labour welcomes the decision to raise the wages of the poorest in society but the debate this afternoon will be suffused with all sorts of ironies. And there are a number of deeper questions which need to be addressed. Not least why a measure that in essence simply jacks up the National Minimum Wage is to be called the “National Living Wage” when it only applies to over 25s, and clearly does not provide what experts and charities say is the minimum necessary to lift hard working people out of poverty.
When this measure was debated in the Commons last week, the Minister, Nick Boles spoke about the NMW with that zeal that marks out a convert. He said that since being introduced in 1999, “it has been a clear and unqualified success in supporting the lowest-paid British workers” and “increased faster than both average wages and inflation without any adverse effect on employment, even during recession”.
The irony is that when the last Labour government was trying to bring in the legislation, back in 1999, the Conservative opposition in both Houses fought tooth and nail over a protracted period against the plans. Now Mr Boles says: “We were wrong to oppose it” and “we are now among its most passionate advocates”.
The government says it wants the change to the NLW because the economy needs rebalancing “from a low wage, high tax, high welfare society to a higher wage, lower tax, lower welfare society”. And goes on to say: “The UK can also do more to raise the wages of the low-paid compared to other countries - 22% of UK workers are low-paid, compared to the OECD average of 16%.”
On balance, this is a good thing – although there is a problem with the logic. The OECD defines ‘low-paid’ as people earning less than two-thirds of median earnings. But the initial introduction of the NLW in April will only put those who receive it at 55% of the UK median wage; and even if the aspirations for a £9.00 NLW are achieved by 2020 that will only get us to 60%. In other words this is more about raising the level of the NMW than introducing a genuine living wage.
According to the Living Wage Foundation, the current UK living wage would need to be £8.25 an hour, and £9.40 an hour in London. But the government are setting it at £7.20 – far from the living wage that many people have campaigned for. So we will ask the Lords Minister today about this anomaly and why the 2020 target falls way short of the OECD recommendation of 66.7% of the national median wage.
We will also ask the government to do more to help those sectors and groups currently most exposed to low pay, including social care, cleaning, retail and hospitality. Low pay also appears to be more prevalent in part-time work, shift work, and among both younger and older workers. It affects women more than men. And geographically, has a bigger impact in the North West and Midlands, as well as Scotland. Clearly, if the policy works as intended, things will improve, helping not only to reduce the gender imbalance in pay but move us towards a more equal society. Yet there are real risks that non-compliance with statutory minimum wages will rise, and that changes in employment practices will impair the policy objectives.
Labour does not want to suggest or imply that there is not a majority of responsible employers who always abide by minimum wage legislation. But the figures produced by the government showing sectors, groups and areas with chronic low pay are cause for concern, and we hope Ministers will agree that more can and should be done.
Lord Wilf Stevenson of Balmacara is a member of Labour’s front bench team in the House of Lords. He tweets @Missenden50
Published 18th January 2016