How would abolishing the minimum wage help to make work pay?

minimum-wage-poverty

The so-called ‘public debate’ over whether Michael Philpott (or if you prefer, Iain Duncan Smith) typifies the sort of people who live on social security in modern Britain has effectively masked something more sinister that was put in motion this week.

The government wants the Low Pay Commission to consider the impact on “employment and the economy” of the minimum wage.

The implication is clear: The Conservatives want to get rid of the statutory lowest level of wages, in order to further depress remuneration for the poorest workers in the UK. Whether or not that is the fact, it’s what people will infer.

The timing is a classic tragedy of modern Conservatism. Having just made a bold (and entirely false) claim that its benefit cuts are “making work pay”, the Tory-led Coalition appears dead-set on making sure that it won’t.

I had an argument, on this very subject, over on the Conservatives’ (I think) Facebook page. It was a while ago, but I thought I had saved the debate for posterity. I spent much of yesterday looking for it and came up with nothing, so what follows is a paraphrase of what I said there, and the best I can remember. For that I apologise. I can only advise others reading this that you should never throw anything away, as you might need it later! (That goes for things you’ve said, mind, not sweet wrappers or other rubbish – you shouldn’t all become hoarders just because of me).

The discussion was based on the premise that, rather than pay the bare minimum, employers should in fact pay a ‘living’ wage, in line with what Labour has been proposing.

I’m very much in favour of a living wage. If a person receives enough, in return for their work, to pay their way in the world without having to take state benefits, several things happen:

They feel valued in their position, and try harder. The quality of their work improves, along with that of the other workers in the company who also receive the living wage, and as a result, the employer is likely to benefit from improved orders. The company flourishes and is able to take on more employees.

As a result of this, the firm and its employees are able to pay more taxes and National Insurance contributions – not as a result of an increase imposed by an oppressive government, but because more people are employed there. The government therefore has more cash to fund public services; it has less need to borrow money and will not have to pay as much in social security benefits – in-work benefits will be unnecessary because working people will be receiving enough to put them above the threshold for them, and fewer people will be claiming out-of-work benefits.

The government can then pay off its debts and deficit more quickly and then cut tax rates. This means everyone will have more money in their pockets – including employers, who can then plough the extra cash back into the firm with infrastructure improvements and more employment.

You see how this works?

Contrast this with what happens when you employ somebody on the minimum wage, or abolish it.

People on the absolute minimum do not feel valued. They consider their employers to be taking more than their fair share of the profits generated by the company where they all work together. They feel undervalued – and demeaned by the fact that they have to claim state benefits in order to survive. Their health may be put at risk, because they may find themselves having to work ridiculously long hours, just to make ends meet. Their work starts to suffer, and they may end up unemployed, either for health reasons or because the company is suffering (as a result of workers turning in substandard work).

The company makes cutbacks. Its bosses don’t want to take a pay cut so they cut corners elsewhere. The workforce diminishes and the quality of the product suffers. In time, the firm’s contribution to the national economy dwindles – if it doesn’t go to the wall altogether. Its tax and National Insurance contribution plummets.

The government finds itself paying in-work benefits for increasing numbers of people, and unemployment figures skyrocket. Employers and workers do not provide enough money in taxes and National Insurance to pay the bill for public services, so these are cut back and borrowing increases. The nation goes into a debt spiral.

That is the current situation.

Which of the above would you rather have?

15 thoughts on “How would abolishing the minimum wage help to make work pay?

    1. No job, no benefits, no income for a whole year. Thanks, Cleggy.

      Our unelected junta of Bullingdon twats have plenty of common sense, here’s how it goes:
      They are rich because we are poor, therefore, the poorer they make us, the richer they’ll be. This works for them even under the current economic climate, in which it is now transparently obvious to as yet undetected microbes on Jupiter’s moons that capitalism is irreparably broken and finished; if they can’t actually make themselves materially richer, at least they will, by further impoverishing their livestock (that’s us), at least feel comparatively a little richer.
      What they don’t have is a shred of common human decency, compassion, an electoral mandate, or any friends.

  1. aussieeh

    Unfortunately this seems to be the Tory way of doing things. Steal as much as you can, while you can. They save a few quid cutting benefits to the sick and or disabled, cut the working benefits, force people into slave labour etc. The only vision they have is how to swell their own ill gotten gains. I worked for a Tory when I left school a lifetime ago. I was paid a pittance the whole time I worked for him, I loved the job and the people I worked with. But my first years income was less than £200, although I made him almost £700 a week with my time. This Tory robbed his workers, his customers, the taxman, he would sooner make £10 off a customer and provide a shoddy service with reconditioned or cheap spurious parts and lose that customer, than spend a few quid more on new and genuine parts and keep that customer happy. False economy (Osborne anyone) this prat couldn’t see the big picture. He wouldn’t pay the going rate to his workforce, within 6 months of me leaving he had completely changed his workforce, instead of him having 9 mechanics and 2 apprentices as was there when I started work in 1971, he had a garage full of apprentices and 1 mechanic. This was a main agent for a world renowned top selling motor. I walked out after being told “no one is indispensable you know”, I had asked for a pay rise it was 1982 and my take home pay was £62.50 for a 6 day week, I was 27 years old at the time.I made more money doing jobs on the side for his discontented customers. He rang me up 12 months later and almost begged me to go back, after making him wait for 2 weeks for an answer, I told him to F$%K OFF. All the Tories I’ve known and thankfully that’s not many, seem to have this inbreed notion that everyone not of their ilk is there to be used and abused, that they have some God given right to take whatever they please be it a nations wealth, or the means of someones very existence and Fuck the consequences. These bastards will see this country in complete ruin because their amoeba sized brain cell cannot get passed it’s own self importance. A living wage ha ha, a decent N.H.S ha ha decent education for the scums brats ha ha ha, decent housing ho ho ho. Not while they can privatize and steal the lot. Execution is too good for these treacherous bastards.

  2. NORBET (@NORBET)

    the simple argument you could use against the Tories re Mick Philpott & Co ….is how much would have it cost to put all those kids into care ? …quite a racket industry if a certain social worker bashing Sunday Telegraph columnist is to be believed ….and where are the workhouses to put that horrible man into …..even senior Tories have told #IDS these ” reforms ” can’t be done without some sort of conscription …also there is the paradox of an extended big state for authoritarian enforcement …the one thing that the Tories and right wing ” libertarians ” are dead against

  3. Johnno

    If you can’t manage on the minimum wage, let alone a reduced or frozen minimum wage, which is just what happened under G.W.Bush in America, then what you need to do, if the American experience is to go by, is to get a second, third, or forth sub-minimum wage to make up the shortfall. Basically this notorious right-wing ploy is a way of getting blood out of a stone and making people work twice or thrice as hard for half or the same wages.

    It stinks on ice!

  4. NORBET (@NORBET)

    The Tory tabloids and broadsheets omit the fact that the two women worked as cleaners …however the market rate ensured they’d to claim working tax credits

  5. Sue Paraszczuk

    I’ve got the TV on at the moment and there’s just been yet another upbeat advert by a company encouraging us all to take out those exorbitant interest-rate pay day loans.. This was followed by one of those heart rending charity appeals for us to give two pounds a month to save some pitiful children in a war torn African country from a horrible slow death from dire poverty, disease and hunger.
    What does this tell me?
    It tells me that our wages will be cut and cut again to make Britain ‘competitive’ in the global market where people in places like Vietnam and Indonesia have to work for less than subsistence wages – so we’ll have to get used to living on less and use these ‘generous’ loan companies just to make ends meet (and become miserable debt slaves). Meanwhile we’re reminded that there are people worse off than us and since the industrial military complex just has to be allowed to continue its vile ‘business as usual’ and its out of the question to ask them to clean up their own mess then we’re being made to feel guilty about having relatively more than those poor African people so WE should pay to help them out.And given that, unlike the wealthy, we tend to have a social conscience and are genuinely affected by images of little children dying before our eyes, we give as much as we can.

    To sum up:-
    Keep the FAITH (rampant capitalism) so that they (the rich) can always HOPE for sustainable CHARITY (i.e.the less poor rescuing the destitute).

  6. dunelmiandigger

    The one thing these idiots haven’t worked out yet is that if you continue to drive down wages and drive up property prices, thus reducing the amount of ready cash available at street level in the economy, all that happens is that the spiral of depression gets worse and worse!

  7. rayglen

    Read “The Wild Wheel” by Garet Garrett. – http://www.mises.org/document/3205/The-Wild-Wheel

    It’s free as a e-book for your Kindle.

    Henry Ford was no ordinary capitalist, he believed his workers received rewards BEFORE share/stockholders and was able to lower the price of his product.

    The Fordfoundation still does philanthropic work worldwide.

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