Locking in Fairness: An uprating mechanism for the minimum wage

By Sanjiv Sachdev.

Published: July 2001

Responses

You draw attention in your paper to the parallel between the uprating of the minimum wage and that of the basic pension. In both cases, there is a problem about persuading the government to adopt a formula which is seen as too rigid. A possible solution, it seems to me, would be a formula which would constitute a norm, departures from which would have to be explained and defended. For instance, in the case of the minimum wage, the norm might be annual increases based on the "half male median earnings" formula. The Low Pay Commission could recommend – or the government could adopt – a different figure (higher or lower) in a particular year, but only on clearly stated grounds. The law could also provide, as a norm, that a shortfall in one year should be made good the following year.

In the case of the basic pension, there is no advisory body comparable to the Low Pay Commission, but I would favour the creation of such a body – though I would prefer to see a body with wider responsibilities for the National Insurance Fund. I am not sure whether tying the pension to male median earnings would be appropriate, but there would be obvious advantages in applying the same percentage to the minimum wage and the pension.

Tony Lynes, National Pensioners Convention
tony.lynes@virgin.net


Looking to France for a model of how to operate a minimum wage may not be altogether wise – there is a lot of evidence to suggest that the level of the minimum wage has obstructed growth of employment in the service sector and contributed to the country's unemployment problem. The solution to low pay lies not only with a minimum wage but with that other social democratic policy instrument – redistribution through the tax-benefit system. Provided that the final incomes of lower earners rise sufficiently fast, does it really matter how far this is achieved through the minimum wage or through more generous in-work benefits?

Stuart White, Jesus College Oxford
stuart.white@jesus.ox.ac.uk


I was very interested in your article in today's Guardian. Have you seen any of the work of the Responsible Wealth organisation in the US? They advocate a "Living Wage" for straightforward business reasons. Their report can be found at: www.responsiblewealth.org.

Jim McCracken, Director, North West Low Pay Unit
NWlowpay.jim@btinternet.com


Have you seen "A minimum income for healthy living" J.N.Morris et al. (London School of Hygiene and Tropical Medicine), Journal of Epidemiology & Community Health, December 2000. Adequacy was never considered when the level of the minimum wage was set. Uprate by all means but adjust the base to a level beyond absolute poverty.

Paul Nicolson, Zacchaeus 2000 Trust
zacchaeus@cwcom.net


To fix minimum wages levels or levels of benefits or pension levels, we need to know what standard of living a given income actually buys. Astonishingly, the government has never done the necessary detailed research. Working on a shoe string, the Family Budget Unit (directed by Hermione Parker) has tried to fill the gap by making regular calculations of the cost of a standard of living they call "low cost but adequate" - intended as a poverty threshold. Calculations are based partly on what most people regard as necessities, partly on observations of spending patterns, partly on judgements of "needs" and what constitutes a healthy diet, etc,. but they also take into account how often clothes and other goods wear out and need replacing. The National Consumer Council is now willing to take this work over and is currently discussing how to do so with the Family Budget Unit.

The significance of this work being taken over by a government-funded quango should not be under-estminated: for the first time the government will have reliable "in-house" estimates of what an acceptable minimum living standard actually costs. But as well as adding to the pressure to ensure benefits and minimum wages are consistent with maintaining acceptable standards, we should perhaps be aware that there could also be pressures on those responsible for the work to revise their estimates downward to fit existing benefit levels. The process will need our support and vigilance.

Richard G. Wilkinson, University of Nottingham Medical School
Richard.Wilkinson@nottingham.ac.uk


You will of course know that the trade unions voted against just such an uprating mechnism at the National Policy Forum at Exeter in July 2000, when it was put forward by some of the constituency representatives. They can do their own explaining, but I believe that the concession from the Government was to make the Low Pay Commission a permanent body, rather than disbanding it after it had come up with the first set of recommendations. In return the unions agreed to oppose any more radical proposals.

Further, the Government has consistently rejected parts of the LPC recommendations, chiefly on the level of the youth rate and (three times now) on paying the adult rate at age 21-plus not 22-plus. And by comparison, student tuition fees have gone up each year from £1,000 to £1,025 to £1,050 to £1,075 without any similar references to "bedding-in" and checking whether or not disadvantaged groups are deterred (which they are).

Ann Black, Labour Party National Executive Committee
ablack@brookes.ac.uk
www.labourcounts.com/AnnBlack/


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