Michael Meacher

Labour Party | Oldham West and Royton

Low Pay Article for Working Brief

At the very start of his leadership of the Labour Party, at the 1994 Labour Party Conference, Tony Blair promised that in his new Britain, the workforce would not be “treated as servants, but as partners” and that “ we will make work pay.” Then at the 1999 party conference, he added that the National Minimum Wage (NMW) would help create a “society [in which everyone has the chance to share in increasing prosperity.” So what happened?

The NMW has proved effective at curbing the worst excesses of the worst employers but has been found badly wanting when it comes to tackling in work provision especially for single adults.  Admittedly, the NMW has raised wages at the bottom end of the scale for 2 million workers, of whom (rising from £4.85 per hour initially to £5.05per hour in October 2005 to £5.35 per hour in October 2006) of whom two thirds are women, but NPI has found that nearly a quarter – 23% - of UK employees are still low paid, with almost 7 million of them earning less than £6.50/hour.

What is really disappointing is that this percentage on low pay has remained almost unchanged since the NMW was introduced. In fact, this percentage shows signs of increasing rather than of diminishing.

There are now two million “domestic” workers in the UK – more than at any time since the 1930s. One of the largest expansions in the UK Labour market in recent years has been in the notoriously low paid hotel , catering and hospitality sector. It employed 1.7m workers in 2003, 14% up on 2001. the average salary of a commis chef is a meager £13,000. Not surprisingly, there is a shortfall of 60,000 chefs.

The government boasts that the US has lost 3 million jobs, Japan 1.5m and Germany 1.4m while UK has increased jobs by 1.6m since 1997. overwhelmingly, these are not high skilled, high paid, high value added jobs, but often are very low paid. So what as gone wrong?

At its introduction, the national minimum wage was set far too low. Originally, it was said by the Tories and laissez fair marketers  that NMW would spark a huge increase in unemployment. Michael Howard suggested that as many as 2 million jobs could be lost. In fact, there is not a single report of anyone losing their job as a result of the introduction of the NMW, indicating there was some overkill in lowering the NWM starting point in order to avoid unemployment that never happened.

This government – in the person of Tony Blair – has been closer to the CBI than to the TUC in laying down market conditions and has almost always taken employers advice, colluding with big companies which will not recognize trade unions. Blair’s Government has as its central ideology a neo-liberal, privatizing, de-regulatory agenda.

Sub contracting public services out to private contractors and PFI have produced downward pressure on pay and have been intended to do so.

The outsourcing of services is now global. The biggest symbol of the post industrial economy of the UK is call centres. The telecoms service sector has grown by 2505 in the last decade. The average call centre worker is female in her 20s, on a starting salary of just £12,000. Income Data Services research showed that average pay for all call centre staff in 2004 was a measly £15,000. Not surprising then, that 60% of employees in the sector are reporting difficulties in making ends meet.

Nor does this mean low paid jobs are now being exported out of the UK. Recent research showed that out of more than 100 call centre employers surveyed, three fifths were expecting to take on further staff in the UK in 2005. So what should be done?

Clearly, the NMW needs an uplift well beyond the £5.05/hr planned for this year. If aligned with the Council of Europe Decency Threshold, that would raise it to £6.70/hr. This is not out of line with minimum wages operated in other EU countries. We should support the living wage campaigns currently run by community groups and trade unions in London and Birmingham which have had some big successes. Many big companies at the high profile Canary Wharf development in East London’s docklands have been pressured to agree a set of minimum standards for pay and conditions. Night cleaners at the London HQ of HSBC receive £7.10/hr.

If research shows, as it does, that the most effective way out of child poverty, still over 3 million,  is through parents working and getting benefits and tax credits, why can’t wages do that and not the tax credits? The tax credit system simply subsidises low paying employers in a from of perverse corporate welfare.

Asda has 122,000 employees in the UK. Checkout operators are the lowest paid full time workers in the country, with average take home pay of £205 per week. Yet Wal-Mart, of which Asda is now a British subsidiary, posted global profits last year of 5bn. It’s obscene to subsidise Wal-Mart with the Working Families Tax Credit.

We need a fundamental change in the Government’s market philosophy. We don’t need the so-called EU Lisbon agenda of flexible and Anglo Saxon market deregulation model in EU markets that the French (and many other EU) voters so strongly disagree with. Decent pay does not mean a protectionist or uncompetitive economy, it means stopping low pay employers holding the nation to ransom in supporting the lowest paid quarter – or more -  of the workforce.

It means – as Labour said in this year’s general election – going forward, not backwards to the 1930s or the Edwardian era.

It means reversing pay obscenity under Labour whereby the number of persons now paid more than £1m per year has increased from 700 in 1997 to 6,000 today.

We need a full scale, thorough investigation of the whole system of pay in the UK. Poverty pay at the bottom and luxury greed at the top are intimately connected.