New Statesman & Society, 8 September 1995

Paul Anderson looks at the politics behind this week’s launch of a£4-an-hour minimum wage campaign by two of Britain’s biggest unions
The minimum wage is still going to be the big controversy of next week’s TUC Congress: the left-leaning firefighters’ and build­ing workers’ unions saw to that during the summer by ensuring that motions demanding a statutory minimum wage of half male median earnings appeared on the conference agenda, against the wishes of the powers-that-be in the TUC. But those who were looking forward to seeing blood on the carpet in Brighton are likely to be just a little disappointed. The unions have spent more than a year wrangling with each other and with the Labour Party over Tony Blair’s unwilling­ness to put a figure on its promised statu­tory minimum wage – and at times, despite the best efforts of TUC general secretary John Monks to calm tempers, the wrangling has seemed set to turn into a proper brawl.
In the past couple of months, however, much ofthe spirit has gone out of the argument as Blair has made it clear that he will not budge, whatever the unions decide at the TUC and however the vote goes at Labour conference next month. The three big unions whose members have most to gain from a minimum wage – the GMB, the Transport and Gen­eral Workers’ Union and Unison, the public sector union –may well back the formula of half male median earnings at both conferences. (This was the basis for Labour’s promised minimum wage in 1992, and it currently yields a figure of £4.15 an hour or £5.50 an hour, depend­ing on the statistical assumptions.) But they have accepted that there isn’t a lot of point in resolution-mongering or bloody confrontation with Blair.
Instead, they are shifting their efforts towards attempting to tap what they believe is widespread public support for the idea that £4 an hour is the minimum anyone ought to be paid, in the hope that this can be used to press a Labour govern­ment to write the figure into its legisla­tion. This week, both TGWU and GMB launched campaigns for a £4 an hour minimum, which their respective gen­eral secretaries, Bill Morris and John Edmonds, made clear they saw as a target in pay negotiations as much as a figure for a statutory minimum under a Labour government.” If we are going to fight, bet­ter to target the bad employers now,” said Edmonds at Sunday’s photo-opportun­ity when four outsize £1 coins were delivered to the offices of the Confedera­tion of British Industry; the TGWU’s blunt slogan is “£4 now!”.
It remains to be seen how effective the TGWU and GMB campaigns will be. The two unions are running their efforts separately—there was a race to be first to launch this week—which might be less sensible than working together. On the other hand, there’s no doubt that the demand for £4 an hour strikes a real chord with the more than 3.7 million workers (three-quarters of them women, two-thirds of them part-timers and half of them both) who earn less. If nothing else, the campaigns should do some good for both unions’ recruitment among this lowest-paid quarter of the workforce.
What, though, of the effect on Labour? Blair told the BBC’s Frost on Sunday pro­gramme at the weekend that he would not be pushed into setting a figure before the election – and there’s no reason to doubt him.
Labour has slipped craftily into the position of putting off, until after the elec­tion, setting a figure for the promised statutory minimum wage. Until this summer, the line was merely that it was ridiculous to name a figure so long before a general election. Then, in June, shadow employment spokesperson Harriet Harman declared that, instead of setting a minimum wage according to a formula just related to average earnings, the better way to do it was “to have a Low Pay Com­mission, involving unions and employ­ers, which takes account of the employ­ment situation and the distribution of income in the workforce and then arrives at a consensus about it… That’s not something you can do in opposition, you have to do it in government”.
The reasons for the change are simple enough to understand. Labour is both genuinely unsure about the precise impact on unemployment of a minimum wage set at any particular level and – more important – afraid of Tory and employer propaganda exaggerating it, even if the party went for a figure of around £3.50, as recommended by the Commission on Social Justice, rather than the £4 level that is wanted by the unions (see below).
But it’s equally easy to see why the unions are worried by Labour’s failure to get specific. A statutory minimum wage has not been a favourite of the British trade union movement for very long.
Until the early 1980s, although it was supported by the National Union of Pub­lic Employees (now part of Unison), a bloc of left-wing unions led by the TGWU, and right-wing unions led by the engineers’ and electricians’ unions, pre­vented its even being discussed seriously in Labour Party circles, on the grounds that it would undermine free collective bargaining.
By the mid-1980s, however, the wan­ing of the general unions’ power in wage bargaining had forced both the General and Municipal Workers Union (the pre­decessor of the GMB) and the TGWU into the NUPE camp – and their com­mitment to a minimum wage was rein­forced by the abolition of the Wages Councils in 1993 The fear of the unions representing the low-paid is that, if Labour is not now prepared to be specific before the election, there is a real danger that in office it will set the minimum so low it affects hardly anyone.
How well-founded is that fear? Not at all, says the Labour leadership – but in government, with Labour faced not only with employer resistance but with the prospect of a bigger public sector wage bill, the story could be very different.


The Tories’ claims about the number of jobs that would be lost as a result of a statutory national minimum wage are dubious

The big question about introduction of a minimum wage is simple. Would it lead to a significant rise in unemployment? And the answer is, to say the least, contested.

For the Tories, who think Britain must compete with the third world on labour costs, it is obvious that a statutory minimum would cost jobs and damage Britain’s international economic competiveness. lt was they who in 1993 abolished all but one of the 24 Wages Councils that at the time of abolition set minimum wages for some 2.5 million workers, nearly two-thirds of them women. In the run-up to the 1992 general election, the Tories consistently claimed that if Labour’s proposals for a £3.40-an-hour minimum were put into effect, up to 2 million jobs would be lost-some 1.25 million at once as employers of low-paid workers went out of business or shed labour, and the rest as differentials were restored for other workers. In the longer run, the Tory argument goes, a statutory minimum wage would also scare off investment and hinder job creation.

It’s not just Labour and the trade unions who think that the Tories’  figures are bunk. No independent macro-economic modeller who has fed into a computer a national minimum wage set at half median male earnings (the formula used by Labour in 1992 to arrive at £3.40 an hour, which yields anything between £3.60 and £4.15 now, depending on statistical assumptions) has estimated the number of lost jobs at more than 500,000 in total. Most have come up with a figure of well under 250,000, and some have suggested that the immediate effect of a half median minimum, by stimulating consumption among the poorest, would be to increase employment.

The truth, of course, is that no one can really know what the effect of minimum wage legislation would be. It’s easy enough to predict that a minimum set at £1 an hour would have almost no employment effect or that a £10 minimum would send both unemployment and inflation spiralling.

But at the £3-£4 level that can realistically be expected from an incoming Labour government (the Commission on Social Justice recommended £3.50), the results would depend on factors that can only be guessed at by the econometricists. How effectively would the minimum be enforced? How would firms respond? What would happen to differentials? How would the tax and benefits systems be changed (if at all) as the minimum wage increases the tax take and decreases the sums spent on social security for the low paid?

To make matters worse, there’s little that can be concluded from comparisons with other countries. Many other industrialised countries have a statutory minimum wage or legally binding minima agreed by collective bargaining on a sector-by-sector basis – but there is no consistent pattern among them in terms of rates, of either unemployment or employment creation. Even detailed studies of the effects of minimum wages in other countries are inconclusive. Both in France and in the United States, there has been more than a decade of controversy over the employment effects of statutory minima on teenage employment, with some authorities claiming to find evidence that it has been adversely affected and others saying that there is none.

In the end, the best guess is that a statutory minimum wage set at between £3 and £4 would have some direct negative effect on employment – but one much smaller than the Tories claim and one that would be compensated for by its impact on demand. Whether that best guess is enough to withstand the heat of an election campaign is, however, another question.

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