Employers should never be allowed to dictate the minimum wage


Here’s an interesting development: Ed Miliband announced today that a Labour government would link the minimum wage to average earnings, after the Low Pay Commission proved itself woefully inadequate for the job.

Employers’ organisation the Confederation of British Industry (CBI) immediately leapt up to scream that politicians should not set wages, completely missing the point that, under Miliband’s plan, politicians wouldn’t.

CBI chief policy director Katja Hall gave verbal evidence of her inability to understand a simple issue when she told Radio 4’s Today programme: “The system we have at the moment has been really successful and that system involves the setting of the minimum wage by an independent Low Pay Commission… They have done a really good job and we think it’s much better the job is left to them rather than given to politicians.”

… Really?

The Miliband plan would not give the job to politicians. It would make the minimum wage a percentage of the average wage.

Mr Miliband said it was a “basic right” that hard work should be rewarded with fair pay.

He also took time to talk to Today, saying: “This gets at what is a terrible scandal in this country… that we still have five million people in paid work, unable to make ends meet.”

Perhaps the reason the CBI doesn’t like this idea is the fact that the average wage includes its own members’ massively over-inflated salaries. Under the proposed scheme, every increase in their own paycheques would require a similar raise for the lowest-paid workers in the country.

There is no reasonable argument against that, but it is what they are arguing against, nonetheless.

Perhaps politicians’ next target should be the CBI itself.

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27 thoughts on “Employers should never be allowed to dictate the minimum wage

  1. Jim Round

    I have always wondered about small businesses and the minimum wage.
    For example, care agencies say they do not recieve enough from councils and can barely pay carers a minimum wage, they should be paying employee NI and maybe into a workplace pension, as I have said in previous posts, not all employers are big corporations, how can small business pay a living wage if they are barely getting by?

    1. NeilW

      They either pay or go out of business. Businesses need to be treated like cattle, not pets.

      The outcome of business is decent wages, and relevant output. If they fall down on either of those functions then they need to go to the abattoir.

      And that applies whether they are small, large or something in between.

      Farmers love their cattle. They nurture their cattle. But they never lose sight of what the actual point of job is, and will not flinch in their actions if some of the cattle turn out to be not up to scratch.

      1. Jim Round

        I think we would personally lose a lot of small businesses if that was the case.
        Another example would be a small independent, one Man band sandwich shop.
        Well liked by those who use it, owner uses local produce but needs to take on a helping hand to help in busy periods. If they take on someone on a decent contract (NI, living wage, pension etc…) It could be the tipping point.
        Are we saying we should let it go to the wall? Much to the detriment of those who use it and the local community, high streets are in a bad way as it is.
        It just gives the likes of Greggs a free reign.
        What is the solution in cases like this?

      2. Mike Sivier

        Perhaps it is a mistake to keep propping up those small businesses? Perhaps they are in the way of something better?
        As for the one-man-band sandwich shop you mention – these managed perfectly well in the past. What laws have the Tories, Tory Democrats and neoliberal New Labour imposed that have caused them to run into such terrible problems?
        We need radical change – that is clear.

    2. Smiling Carcass

      Maybe the answer is for care to be the responsibility of government and not line the pockets of private enterprise with taxpayers money.

      As a union representative in the 1970s I and many other similar thinking people maintained if a company cannot pay a decent wage, it shouldn’t be in business.

      Private industry has wailed at each and every improvement in the wages and conditions of their employees, from the introduction of unpaid holiday rights to paid holiday rights and sick leave, better wages, shorter working hours etc. claiming it would lead to mass unemployment and the closure of businesses. This rarely became a reality.

    3. Jim Round

      So a changw in taxation and regulation is needed then, does anyone have any idea of the overheads an independent small business has?

    4. Jim Round

      Yes, it would be interesting to compare, how much gas/electric was, business rates were, the difference between rates/water and council tax and separate water, hygiene regulations, liability insurance, business insurance, they all need to be paid.
      And I for one do not want to see high streets consisting of only national chains that bully small traders (think of the difference between the meat from a good local butcher and the supermarkets)
      Trouble is, I don’t hear any party willing to tackle things like this.

  2. Bryn miller

    The people engaged in the care profession are woefully under paid.How many of us would clean up the bodily mess,feed,wash and dress our elderly and disabled folk 24/7 for approx £6.50 an hour. It’s disgracefull and insulting.

    1. Jim Round

      Precisely my point, there are shortages of carers in many areas because so few want to do the job, no real rota to speak of, some have to buy their own uniform, unsocial hours, all for low pay, again, does anyone know how much the agencies are paid by councils/NHS etc… and what are the other costs that the agency has to cover?

      1. Barry Davies

        Agencies charge more than twice the amount they pay their staff, the agencies are the ones making the money, meanwhile they pay minimum wages so the workers get the top up via benefits to make up the shortfall in the living wage. Don’t feel sorry for care agencies they are coining it in at taxpayers expense, and they don’t even had to guarantee they can supply staff.

      2. Mike Sivier

        This is one of the many reasons it is important to push the minimum wage up above the level at which it is possible to survive comfortably with all bills paid. The taxpayer should not subsidise private business.

      1. Mike Sivier

        We had one yesterday; the agency was paid more than £12 per hour while the worker was on the minimum wage. As the commenter stated, that’s a huge markup for a little bit of admin work.

  3. david

    Personally feel that directors etc pay should be linked to average pay of their employees can you imagine how quickly the minimum wage would rise then?

  4. beastrabban

    Reblogged this on Beastrabban’s Weblog and commented:
    Mike makes the case that the CBI’s opposition to Milliband’s suggestion that the minimum wage should be set at a percentage of the average wages comes from the fact that the massively inflated salaries of their own directors would therefore come into the equation, thus pushing the wages up further. This would not be an issue in Japan, where there is a ceiling on how much company bosses can earn compared to the rest of their workforce. What’s good for the highly capitalist, meritocratic Japanese is far too collectivist for the CBI, who, as another of Harry Enfield’s characters would say, just want to be ‘considerably richer than yow’.

  5. Johannah Buchan

    Regarding the comment about small employers & care workers wages. I know for a fact that someone I know particularly well was assessed for a home care package. The form costed this at £12.96+ vat per hour in 2010. The agency have always paid minimum wage for hours worked only with no travel time & no travel expenses. So they were earning as much as their carers for doing a little admin. I know some councils do pay travel time & exs but private agencies don’t seem to.

  6. Chris Mckenzie

    Left Unity says Labour’s plan to link the minimum wage to earnings is not enough, and is calling for the minimum wage to rise to a living wage.

    Bianca Todd of Left Unity said:

    “Any rise in the minimum wage is welcome, but we need to go further and make sure everyone has a living wage.

    “That means linking the level of the minimum wage to the cost of living, making sure it is enough for a decent life. And being able to live shouldn’t just be a ‘reward for work’ – benefits should be set at a living level as well.”


    1. Mike Sivier

      Of course Labour has a long-term plan (I can’t believe I just typed that, after what the Tories have done to the phrase) to get all firms paying the living wage. I seem to recall they want to phase it in to minimise the shock to smaller firms – can anyone remember if that’s right?

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