The first Conservative budget for 19 years has certainly been memorable. Chancellor George Osborne’s big reveal was the National Living Wage – an unheralded addition to the budget that caught everyone by surprise.
The plan is to set a compulsory minimum wage that will be paid to workers aged 25 and over from April 2016. It will begin at £7.20 per hour in 2016 (comprised of the £6.70 per hour minimum wage and a premium of 50p per hour). After that, the Low Pay Commission (LPC) will be tasked with assessing its level at yearly intervals and will make recommendations about increasing it. The goal is for the living wage to reach £9 per hour by 2020.
The minimum wage was of course a flagship Labour policy, but Osborne’s plan has not come as a result of pressure from unions – regardless of what some might think. The rise of Blue Collar Conservativism – which has seen the Tories aiming to tap into the values of working, aspirational voters – has been remarkable. And the living wage is just the kind of idea that appeals to voters of this kind.
But whatever the motivation and regardless of how happy it makes Iain Duncan Smith, this policy amounts to little more than false advertising. It will have disastrous consequences for the lowest paid.
Although cast as the national “living wage”, Osborne’s version is calculated in a very different way to the wage called for by the Living Wage Foundation. The foundation, which has campaigned for an hourly rate of £7.85 or £9.15 in London, arrives at its figures by calculating the cost of living. The LPC, on the other hand, takes into account what the economy can bear. It is also being encouraged by the government to set the national living wage at 55-60% of the median wage (which is below the International Labour Organization’s threshold for a low wage).
A back-of-the-envelope calculation reveals that the minimum wage would reach just over £8 per hour by 2020 as a result of average increases made by the LPC. George is deceiving the electorate, the National Living Wage is nothing of the sort, it’s a minimum wage for the over 25s.
As such, it creates yet another category of minimum wage worker (there are already four: apprentice, under 18, 18–20, and 21 and over). The LPC has already warned that this complex system is difficult to administer, and that may be about to get worse. Enforcement is complicated when multiple sub-minima are used alongside one another and the minimum wage is worth nothing at all if employers don’t actually pay it.
That, in turn, points to a deeper question about why those under 25 are not considered worth £7.20 per hour. Arguments about skill levels and experience seem disingenuous for this group, especially when the vocational forms of training that minimum wage workers often undertake are all but complete by 18. The long tail of minimum wages that are developing may be more about the needs of businesses. Gradual exposure allows for adjustment (or the exploitation of cheap labour).
And those who qualify may not be better off either – particularly given the benefit cuts announced in the budget.
The new semantics of Tory benevolence will consign millions to low pay. The normalisation of the minimum wage is a widely recognised phenomenon, which begs the question why would anyone be worth more than the new “premium”? There must now be a concerted effort by the opposition parties to retake the debate, to present an alternative vision, and to do right by the millions of low paid that will be in desperate need of help.