In 1938, a visionary politician advocated the idea of a minimum wage. He argued that such an idea would be “a great step forward, commanding the sympathy and support of the entire nation. It would be a measure of social justice … it would be a measure of economic wisdom.” This statement came a few years after another politician had argued that “it is a serious national evil that any class of His Majesty’s subjects should receive less than a living wage in return for their utmost exertions” and talked about low pay as a “condition of progressive degeneration”.
Who were these prophetic radicals, these far-sighted sceptics about the nostrums of laissez faire? The first was Harold Macmillan, the second was Winston Churchill – two of the greatest Conservatives of the 20th century. Despite the chirrups of opposition from the libertarian right, George Osborne’s recommendation to increase the minimum wage is the right thing to do and is thoroughly within the Conservative tradition.
Opposing the introduction of the minimum wage was one of the Conservative’s biggest mistakes. It was based on hysterical warnings about the impact on jobs that proved completely wide of the mark. The vociferous opposition to the minimum wage made the party look dogmatic, mean and interested only in big business rather than ordinary workers or the low paid. The fact that Tories now support a substantial increase in the minimum wage shows they have learned from past mistakes.
A substantial increase in the minimum wage makes sense economically, socially and politically. With the economic recovery gathering steam, now is the right time. Wages have been trailing prices for almost a decade and the minimum wage is worth £1,000 less after inflation than it was in 2008. In the five years from 2008 food prices increased by 30%, while the minimum wage increased by slightly more than 12%.
It is clear that the lowest paid didn’t benefit from Blair’s boom, which concentrated wealth in the south-east, and a minimum wage increase would ensure that those people who have worked long hours and sacrificed the most in the recession will be able to share in the recovery. Renewing capitalism means making sure the free market works for everybody, not just a privileged few. A minimum wage increase is an important step in making that happen.
Such a move would help show that theConservatives care about the low-paid and aren’t just the party of the rich and big business. However, it can’t just be seen as a political bolt-on. It should illustrate that the Tories are concerned that low pay has a real impact on institutions they hold dear. Low pay, meaning that parents are more likely to suffer from emotional pressures and have to work additional hours to make ends meet, can have a damaging impact on the family unit. Some 41% of lone-parent households are in the bottom 20% of the income scale.
Low pay means that people are less likely to spend time with their family or in their community. Poverty also has an impact on educational attainment, affecting Conservative values such as aspiration. Children from the poorest fifth of families are more than a year behind the richest children in terms of vocabulary development by the age of five, and children eligible for free school meals are half as likely to achieve five or more A*-C grades at GCSE as those who are not. Making work pay is important for Conservatives and an increased minimum wage will help to do this and boost work incentives, reducing the need for the state to subsidise low pay through tax credits.
Some commentators have suggested that an increase in the minimum wage might lead to an increase in unemployment. It is worth noting that these predictions were made when the minimum wage was introduced and weren’t realised. However, it is important to minimise any possible impact on small- and medium-sized businesses, so the government should consider cutting business taxes at the same time as increasing the minimum wage.
Of course, raising the minimum wage is just the start. We need to make sure it is properly enforced. We need to make sure more houses are built, given that the low-paid spend between a third and half of their income on housing. We need to continue with ambitious and important reforms to education and skills, because the only way to ensure that incomes rise in the long term is by improving skills and productivity.
We should be pleased that the Low Pay Commission has supported the chancellor’s recommendation for an above average increase to £6.50 an hour. Hopefully the goal is for a more substantial increase to £7 an hour next year. A higher minimum wage would help the working poor and would illustrate a compassionate conservatism which believes in the free market but is suspicious of laissez faire. It will show that the sacrifices of deficit reduction have paved the way for shared prosperity. It will support conservative values such as family, work and community. Increasing the minimum wage is entirely within the Tory tradition and shows the government to be following in the distinguished footsteps of Macmillan and Churchill.
This article was first published in The Guardian on 5th March 2014.