It's time to apply the lessons of the minimum wage

Nowadays when we think of the national minimum wage (NMW), we think of what is roundly accepted as one of the great policy successes of our time. But we shouldn’t kid ourselves that there was unanimity about the need to raise wages.  

Britain was full of employers and employers' organisations predicting the minimum wage would cause mass unemployment and economic ruin.

The CBI warned a NMW "could result in rising prices, business closures and unemployment". That it would “undermine flexibility and was a poor way to tackle poverty". They wanted all new employees to be exempted from the minimum wage for the first six months! 1

They were wrong!

The minimum wage started off at £3.60. With no loss of jobs, and no economic meltdown. And in recent years, it’s gone up substantially. And it’s done so with no negative impact on jobs.

History proved all those doomsday warnings emphatically wrong. And I think there are lessons there for all of us.

So here’s three. 

First: the NMW was a bold policy and we need to be equally bold for its future. 

The TUC is clear, we now need to set the bar higher. That means ministers should set a bolder Low Pay Commission remit:

• A target of 75 per cent of median pay. 
• Getting us faster towards a £15 an hour minimum wage for all. 
• Raising the pay of millions 
• Making the minimum wage a real Living Wage. 

Second: sometimes we have to face down those whose instinctive reaction is to say no to measures that improve the lives of working people.  

This is vital if we are going to deliver a much-needed new deal for working people in this country. 

• 1 in 9 workers are in insecure work. 
• Record numbers of young people on zero hours contracts. 
• Seventy per cent of the kids who live in poverty have working parents. 

The New Deal is the right thing to do. Not just morally, but economically. It will establish a level playing field. Stop decent employers from being undercut by the cowboys. And make sure that everyone has a secure job they can build a life on. 

Just like the minimum wage, good employers have nothing to fear from the New Deal. But that hasn’t stopped some employers organisations’ warning of an economic apocalypse if Labour’s New Deal was made law.  And the arguments are exactly the same as they were 25 years ago. It will cost jobs. Put employers out of business. Reduce flexibility. 

Labour’s New Deal would be good for workers and good for decent employers who are being undercut by the zero hours 🤠🤠 https://t.co/NXhtvzBcBa

— Paul Nowak (@nowak_paul) March 25, 2024

The then British Hospitality Association said back in 1997 that the NMW would destroy 32,000 jobs in the industry2 .

Spoiler alert: it didn’t!

They were wrong then, and they are wrong now. That’s why Labour should resist the out of touch, out of date siren voices from the 90s. Now is the time to forge a new political consensus on tackling the scourge of insecure work and deliver the New Deal in full. 

Third and final lesson. 

The NMW has succeeded because it has been underpinned by what might be unfashionably called social dialogue.  Employers, unions, supported by independent academics, working with government to deliver a minimum wage. We could do with more of that approach today.

Our so-called flexible labour market has failed far too many people. It’s led to massive rewards at the top and stagnant wages for everyone else. Unleashed epic insecurity and in-work poverty. And actively undermined our productivity. 

So it’s time for a new approach. 

Time to apply the lessons of the minimum wage. Time for the New Deal for workers that Britain needs. 

• 1  All quotes from Hansard 16 December 1997
• 2 British Hospitality Association, forerunner of UK Hospitality, quoted in Hansard 16 December 1997