The Conservative Party seems to have had a change of heart. After voting through real terms cuts in the National Minimum Wage (NMW) every year since it came to Office, many in the party are concerned about the consequences this policy is having on the 1,400,000 workers (and voters) who are paid the NMW. Those who question the achievements of New Labour should note how, 15 years after Blair forced through NMW legislation in the teeth of opposition from the Tories and the Confederation of British Industry, the only debate within the Conservative Party on the NMW is how large the annual rises should be.
In its typical style, the Conservatives would like to put more cash in workers’ pockets without it coming from their employers or the government. Instead, proposals include offering tax incentives to employers, or compelling businesses above a certain size, to pay higher wages. However, there is no question of the Coalition government placing any pressure on business to pay the Living Wage, which is some 20% higher than the NMW. Apparently, it is unaffordable for employers to pay a liveable wage to their hardest working employees whilst their directors enjoy multimillion pound bonuses on top of regular salaries that already resemble a barcode.
I don’t understand why any organisation should be rewarded for paying 85% of the Living Wage rather than 80%. I disagree with the principle of ‘rewarding’ any organisation or person for meeting their minimum ethical responsibilities at all. However, I do recognize that, where some sectors of the economy only scrape viability on the back of artificially low wages, state support may be needed in the vital and inevitable transition towards a Living Wage economy. There will come a time- and I hope it comes sooner rather than later- in which it becomes socially and legally unacceptable for workers to be paid less than a Living Wage. Though both Labour and the Tories in Britain are dithering over incentives, ‘Living Wage Zones’ and similar schemes, and in the US state governments are encountering fierce resistance with Living Wage legislation, it is only a matter of time until the gap between statutory and liveable incomes is closed- provided we continue to campaign energetically for it.
When that time comes, small businesses might genuinely struggle to meet the jump in labor costs, which could be as high as £3,000 per employee per annum. If that sounds like a high figure, remember that the government would gain 50% of that through higher tax receipts and lower benefit payments, and the release of that cash would more than offset any potential economic shock. Also, productivity could rise by over 10%. Therefore, I propose that businesses with fewer than 5 employees would be exempt from all National Insurance contributions and pay a discounted Corporation Tax rate of 10% on the first £500,000 of profits. Businesses with between 5 and 25 employees and annual profits beneath £10,000,000 would receive a discount of £1,500 on the NI contributions of each employee.
That way, everybody receives what they are entitled to; small businesses are given a much-needed competitive advantage over their larger rivals; the government’s finances and the economic situation are improved; and most importantly those on low wages will receive a much needed boost. Such logic must prevail sooner or later.
Musn’t it?