Tory minister breaks rank over minimum wage : Tue Apr 02, 2013 10:33 pm  

Not sure if anybody noticed this last week but it has caused a bit of a stir in Conservative circles. Matthew Hancock who is Minister for Skills in BIS and one of the new generation of upcoming Tories (he's only 34), has made a speech on targeting low pay, where he has called on the Conservatives to be 'strengthening the minimum wage'. Now you may think this is a bit of cynical posturing with a few non-commital soundbites, but his speech is a direct challenge to prevailing Tory thinking, in a number of areas, and for a Minister to be breaking ranks over this is quite significant. Some quotes you may find interesting. First, some facts about income inequality since Thatcher's era, that you don't often hear a Tory mentioning: Since 1986 real hourly earnings have grown by 62%. The greatest beneficiaries of this by far have been the top 1% of earners, who have seen their pay more than double. By contrast, the bottom fifth saw growth of just half, and the middle by less still. From 2003 to the crash in 2008 median pay was completely flat. Meanwhile GDP grew by 11%. The boom in GDP was characterised by rising youth unemployment, stagnant earnings, and mass immigration to fill skills shortages. If you were in the lower half of the earnings spectrum, you might have wondered how the growth had passed you by. Just as in the past I’ve argued that the centre-right needs to act on unjustified high pay, on ending the rewards for failure we saw at the top, so we must act on unjustified low pay at the other end of the spectrum. Then Hancock went on to talk about leisure time being more important than just accumulating money: Now I love my job, and work a humungous number of hours. And while many people in this room might do the same, let me let you into a secret: we’re unusual. Working more hours may be a necessary thing, but it’s not necessarily a good thing. It means less time to see the family; less time in the garden. Less free time. I’m in favour of more freedom. If the cardinal sin of modern economics is assuming that markets are always rational, then the second great failing is forgetting who we’re in it for. Now this is where he starts getting quite controversial, with loaded comments against some of his comrades: Likewise, some argue that lower labour costs are good for competitiveness. But hearing on the news that that Britain has the lowest unit labour costs in the G8, isn’t much consolation if you’re out of work and you want more for your family than a weekly cheque from the DWP. And then Hancock goes on to rubbish the common myths about the minimum wage being bad for employment: First, the clearest rule governing low pay is the minimum wage. Some argue that the minimum wage is bad for the economy because it damages our competitiveness. We have relatively high pay compared to the rest of the world, and to compete we must keep our costs low. Now I'm passionately in favour of making Britain more competitive. But we want to be competitive so people can be better paid. What is competitiveness for, if it's not to make us more prosperous and free? The standard argument against the minimum wage is that a minimum wage would price people out of jobs. But the academic analysis doesn’t back it up. The analysis of the impact of minimum wages is one of the most studied areas of economics. There are so many studies that economists now publish studies of studies, bringing all the data together. Two of the most recent, which together analysed 91 studies, found that “the minimum wage has little or no discernible effect on the employment prospects of low-wage workers.” Many reasons are cited by the study, including increased pay raising the efficiency of the workforce, and the very small impact of minimum wage increases on the total pay bill. After all, work is a team effort. Working out how much of a firm’s revenue is down to which member of the team is an imprecise art at best. Just as with high pay, the question of just rewards is important. At the moment a lot of Tories are posturing and positioning themselves to the right, anticipating a right-wing challenge to Cameron, Hancock is taking a bit of a political risk here putting his head above the parapet, of course on the Conservative blogs he is being torn to shreds as a heretic. Looking at his background he is a former Bank of England economist and his speech makes a lot of sense to me. Time will tell whether he gets shot down and shifted out of government before long but he might be the type of Tory that 'gets it' on social inclusion and wants to move the party back in the One Nation direction it had been under Churchill or MacMillan. The full speech is posted on his website http://www.matthewhancock.co.uk/campaig ... ion-speech

Not sure if anybody noticed this last week but it has caused a bit of a stir in Conservative circles. Matthew Hancock who is Minister for Skills in BIS and one of the new generation of upcoming Tories (he's only 34), has made a speech on targeting low pay, where he has called on the Conservatives to be 'strengthening the minimum wage'. Now you may think this is a bit of cynical posturing with a few non-commital soundbites, but his speech is a direct challenge to prevailing Tory thinking, in a number of areas, and for a Minister to be breaking ranks over this is quite significant. Some quotes you may find interesting. First, some facts about income inequality since Thatcher's era, that you don't often hear a Tory mentioning: Since 1986 real hourly earnings have grown by 62%. The greatest beneficiaries of this by far have been the top 1% of earners, who have seen their pay more than double. By contrast, the bottom fifth saw growth of just half, and the middle by less still. From 2003 to the crash in 2008 median pay was completely flat. Meanwhile GDP grew by 11%. The boom in GDP was characterised by rising youth unemployment, stagnant earnings, and mass immigration to fill skills shortages. If you were in the lower half of the earnings spectrum, you might have wondered how the growth had passed you by. Just as in the past I’ve argued that the centre-right needs to act on unjustified high pay, on ending the rewards for failure we saw at the top, so we must act on unjustified low pay at the other end of the spectrum. Then Hancock went on to talk about leisure time being more important than just accumulating money: Now I love my job, and work a humungous number of hours. And while many people in this room might do the same, let me let you into a secret: we’re unusual. Working more hours may be a necessary thing, but it’s not necessarily a good thing. It means less time to see the family; less time in the garden. Less free time. I’m in favour of more freedom. If the cardinal sin of modern economics is assuming that markets are always rational, then the second great failing is forgetting who we’re in it for. Now this is where he starts getting quite controversial, with loaded comments against some of his comrades: Likewise, some argue that lower labour costs are good for competitiveness. But hearing on the news that that Britain has the lowest unit labour costs in the G8, isn’t much consolation if you’re out of work and you want more for your family than a weekly cheque from the DWP. And then Hancock goes on to rubbish the common myths about the minimum wage being bad for employment: First, the clearest rule governing low pay is the minimum wage. Some argue that the minimum wage is bad for the economy because it damages our competitiveness. We have relatively high pay compared to the rest of the world, and to compete we must keep our costs low. Now I'm passionately in favour of making Britain more competitive. But we want to be competitive so people can be better paid. What is competitiveness for, if it's not to make us more prosperous and free? The standard argument against the minimum wage is that a minimum wage would price people out of jobs. But the academic analysis doesn’t back it up. The analysis of the impact of minimum wages is one of the most studied areas of economics. There are so many studies that economists now publish studies of studies, bringing all the data together. Two of the most recent, which together analysed 91 studies, found that “the minimum wage has little or no discernible effect on the employment prospects of low-wage workers.” Many reasons are cited by the study, including increased pay raising the efficiency of the workforce, and the very small impact of minimum wage increases on the total pay bill. After all, work is a team effort. Working out how much of a firm’s revenue is down to which member of the team is an imprecise art at best. Just as with high pay, the question of just rewards is important. At the moment a lot of Tories are posturing and positioning themselves to the right, anticipating a right-wing challenge to Cameron, Hancock is taking a bit of a political risk here putting his head above the parapet, of course on the Conservative blogs he is being torn to shreds as a heretic. Looking at his background he is a former Bank of England economist and his speech makes a lot of sense to me. Time will tell whether he gets shot down and shifted out of government before long but he might be the type of Tory that 'gets it' on social inclusion and wants to move the party back in the One Nation direction it had been under Churchill or MacMillan. The full speech is posted on his website http://www.matthewhancock.co.uk/campaig ... ion-speech

Re: Tory minister breaks rank over minimum wage : Wed Apr 03, 2013 8:08 am  

Interesting.

It never ceases to amaze me how people just don't seem to 'get' the issue of low pay.

There's a clear business case for paying decently, as stated by a speaker from KPMG at a conference I attended last year, explaining why that company had become a living wage employer.

Re: Tory minister breaks rank over minimum wage : Wed Apr 03, 2013 8:25 am  

Mintball wrote:

Interesting.

It never ceases to amaze me how people just don't seem to 'get' the issue of low pay.

There's a clear business case for paying decently, as stated by a speaker from KPMG at a conference I attended last year, explaining why that company had become a living wage employer.

Apart from cleaners and possibly the odd trainee receptionist, would KPMG have that many minimum wage employee's. A good stance to take never the less.

I suppose the main objectors would be the factory employing 100 workers having to fork out an extra quid an hour amounting to £4k a week.

Re: Tory minister breaks rank over minimum wage : Wed Apr 03, 2013 8:51 am  

Well said by Mr Hancock.
The economy is a tool for the well-being of the people, not the other way round.

Unfortunately for him, he'll get sidelined for speaking out.
One does wonder though, if he has those views, why he's a tory?

Re: Tory minister breaks rank over minimum wage : Wed Apr 03, 2013 9:07 am  

rover49 wrote:

Apart from cleaners and possibly the odd trainee receptionist, would KPMG have that many minimum wage employee's. A good stance to take never the less.

I suppose the main objectors would be the factory employing 100 workers having to fork out an extra quid an hour amounting to £4k a week.

I suspect most factories in the UK already pay over the living wage.

It is very much something that impacts on cleaners – and a lot of support staff, in education, for instance. KPMG is not the only big company who have gone down this route – IIRC, so has Barclays.

As Barbudo says, he'll get sidelined, but it helps to move the subject away from being viewed as such a tribal one. His citing of the research into the impact of the minimum wage is particularly interesting.

Re: Tory minister breaks rank over minimum wage : Wed Apr 03, 2013 9:31 am  

Even the Torygraph comes out in favour of raising NMW

Even the Torygraph comes out in favour of raising NMW

Re: Tory minister breaks rank over minimum wage : Wed Apr 03, 2013 10:05 am  

cod'ead wrote: Even the Torygraph comes out in favour of raising NMW it's a decent article. Interesting that there is some support for Hancock. The comments are a mixed bag too – certainly not all damning of the idea.

cod'ead wrote: Even the Torygraph comes out in favour of raising NMW it's a decent article. Interesting that there is some support for Hancock. The comments are a mixed bag too – certainly not all damning of the idea.

Re: Tory minister breaks rank over minimum wage : Wed Apr 03, 2013 10:20 am  

Mintball wrote:

it's a decent article. Interesting that there is some support for Hancock.

The comments are a mixed bag too – certainly not all damning of the idea.

Indeed, the fact that some businesses may fail is not a valid reason to keep a significant proportion of the workforce in penury and reliant on state backhanders to pay their rent or put food on the table. An increase in earnings would be offset by a reduction in tax credits but at least those in work would be earning more for themselves.

As for the number of small shops that may fail as a consequence of paying increased wages, they will be relatively insignificant when compared to small shops that closed as a consequence of targeted price cuts by supermarkets

Re: Tory minister breaks rank over minimum wage : Wed Apr 03, 2013 10:21 am  

If they really want to "make work pay" they should ... erm ... make work pay, instead of forcing JSA recipients to work at virtually no cost to the employer.

Re: Tory minister breaks rank over minimum wage : Wed Apr 03, 2013 10:24 am  

Mintball wrote:

Interesting.

It never ceases to amaze me how people just don't seem to 'get' the issue of low pay.

There's a clear business case for paying decently, as stated by a speaker from KPMG at a conference I attended last year, explaining why that company had become a living wage employer.

It costs KPMG next to nothing to be such an employer! So, not a great example. Effectively a bit of PR. The vast majority of their staff have always been way over a living wage threshold. They may have needed to up a couple of support staffs wages but such costs would be incidental and easily covered by sweating their professional human capital further.