Immediately following Vox Political‘s praise of Ed Miliband’s minimum wage announcement comes this critique by Alex Little. Usually this site has great respect for alittleecon but he seems to have come a little unstuck here. Let’s see what he has to say, and then explain why he’s probably mistaken:
“Ed Miliband goes into this week’s Labour Party Conference with another ‘big’ announcement. He is pledging to raise the minimum wage to £8 an hour. The minimum wage will be £6.50 an hour from October 1st this year, so on the face of it, that looks like a big rise,” he writes.
“However, the £8 figure is what it will be in 2020. Labour want to raise it in stages in consultation with business. £8 an hour would be 23% rise on the current rate, but that doesn’t take inflation into account. To keep the minimum wage fixed in real terms, it must rise by inflation each year. So if Labour were to simply fix the minimum wage in real terms up to 2020, what would its value be?
“If we assume inflation of 2% a year, by 2020, the minimum wage would be £7.32 an hour. With 3% it would be £7.76. So all Labour are actually promising is to raise the minimum wage in real terms by between 3% and 9%, which while better than nothing, will not give the low paid that much of an increase in spending power at all.”
This assumes that a Conservative government – or any government not including Labour – would want to raise the minimum wage in line with inflation. This is something we have never seen before.
Remember, if the lowest amount people are paid had risen in line with inflation since 1986, the minimum wage would now be £18.89. It isn’t. The main premise of Alex’s article is that governments raise the minimum wage in line with inflation so his argument must fall.
A Labour plan for any real-terms increase in the minimum wage must be better than anything the Conservatives have offered since the 1980s (and also better than anything offered by neoliberal New Labour).
“Labour also want to link the minimum wage to median wages, which seems inappropriate to me. They should be linked to the cost of living, with the wage set at a level that allows workers an acceptable standard of living,” Alex continues. Isn’t that the Living Wage?
“Over the next nine months we’ll see Labour desperately trying to differentiate themselves from the Tories. If you look beyond the headlines though, you’ll see that the material differences between the two parties is infinitesimal.”
Not accurate. Labour is putting distance between both the Conservatives and its ‘New Labour’ incarnation. That is a change that should be welcomed.
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