The biggest mistake in politics is to judge a policy by its intentions, not its ayesults. The Living Wage sounds like it’s helping those at the bottom: the over-25s are on £7.20 as of today, up from £6.70 under the old minimum wage. Within four years, it will be over £9. So a massive pay rise for the poor!
Except it’s nothing of the kind. What a £9 minimum wage does is ensure that anyone whose skills are not worth £9 will be unemployed. How many people are we talking about? The OBR says 60,0000. Prof Ray Barrell, from Brunel University, fears it will be closer to 300,000. While the precise number is in doubt, the overall principle is not: higher unemployment is the price paid for a minimum wage. In my Daily Telegraph column today, I ask why no one seems to care about these people who’ll be dumped on the human scrap heap, locked out of the economy by government policy.
The truth: that their unemployment is seen as a price worth paying for a pay rise to millions. But who are these millions? It’s simplistic nonsense to imagine that the minimum wage is the salary given to the poorest households. It’s also given to the spouses of the wealthy, to second earners – and all kinds of people who are nowhere near poverty. The OBR ran the figures, and the below chart gives the lie to the idea of this being a ‘progressive’ reform. The poorer households are on the left, and the richer are on the right.
As the OBR explains:-
Although the [£9 minimum wage] boosts individuals’ earnings towards the lower end of the individual income distribution, it is expected to have a more even effect on the distribution of household incomes, since many workers affected will be households’ second earners. Indeed, around half the cash gains in household income may accrue to the top half of the household income distribution, in part because workers in higher income deciles that do gain from the measure will receive a larger average cash amount
It’s often asked why, if Britain is such a rich country, there is so much poverty around. The answer lies, at least in part, in the dismal quality of the debate. We could see this with Osborne’s tax credit cuts: a policy that would affect the lives of millions, passed by MPs who did not properly understand the impact that it would have. As Paul Ryan recently told his fellow Congressmen in his first speech as Speaker
When we do not follow regular order—when we rush to pass bills a lot of us do not understand—we are not doing our job. Only a fully functioning House can truly represent the people.
Amen to that. Successive politicians and policymakers have taken a superficial approach to poverty and reform, passing bills that they do not understand. There is much interest in policies – like the National Living Wage – that spin a halo around the head of ministers, that generate applause lines in speech. But not nearly as much interest in how these policies affect those at the bottom. And we’re all the poorer for that.
Comments