17 January 2014

By Sarah Glenister, IER staff

The big news story today (17 January 2014) is the surprising announcement that George Osborne apparently backs raising the National Minimum Wage (NMW) to above-inflation levels.

Last night, the Chancellor of the Exchequer told the BBC: "I believe Britain can afford an above-inflation increase in the minimum wage so we restore its real value for people and we make sure we have a recovery for all and that work always pays."

Specifically, he was positioning himself behind proposals for the NMW to be raised to £7 per hour from its current level of £6.31 per hour over the next two years.

Furthermore, the Coalition has appeared to get tougher on employment lawbreakers, announcing on Wednesday (15 January 2013) that employers who pay their workers less than the minimum wage will be charged an increased penalty of up to £20,000.

Has the Coalition seen the light? Or is this simply a cynical attempt to gain votes ahead of the next general election?

Well, the announcements have triggered a sense of unease among the left, who read just last week that Osborne refused to support calls from within his own party to make significant increases to the minimum wage. And that's after years of anti-minimum wage rhetoric, including comments from a senior Tory stating that David Cameron would let the NMW "wither on the vine".

Indeed, a little bit of cynicism may go a long way, as Labour's Shadow Chief Secretary to the Treasury Chris Leslie pointed out the hypocritical stance of the Chancellor following a revealing vote in Parliament this week.

"Ed Miliband and Ed Balls said last year that we need above inflation rises in the minimum wage in order to catch up the lost value over the last few years. And both the Tories and Lib Dems voted against Labour's motion yesterday, which called for action to make this happen," he stated.

Accusing Osborne of political posturing on the run-up to the election, Leslie noted that there had been no "concrete announcement" about the level of the NMW.

His warning was echoed by Head of the Economic and Social Affairs Department at the TUC Nicola Smith, who highlighted that there has been no written statement by the Chancellor vowing to increase wages to £7 per hour.

"His text does not offer his personal support for a rise of this magnitude," she states.

"While giving a welcome endorsement to the case for a real terms rise, he does not explicitly say that his view/the view of the Treasury is that the NMW should be aiming to restore its lost value by 2015/16," she adds.

On the back of such evidence, many commentators have pointed to an increase in Labour Party campaigning on wage levels as being the trigger for the Tories offering vague promises of their own. Indeed, it seems likely that the Chancellor's sudden u-turn on the minimum wage has been spurred by the popularity of much-needed income rises with the electorate.

When it comes to the increased penalty for those breaking NMW law, the drawbacks are fairly obvious. The Coalition has mercilessly slashed funding to public departments and the enforcers of employment law over the last few years, begging the question: how will the higher penalty reflect a government "crackdown" (as Vince Cable has called it) on exploitative employers if the money to find and punish the lawbreakers is simply not there?

So how can the left go further than the Tories with a unique position of their own, and a concrete plan to improve living standards among recession-hit Britons?

The Institute of Employment Rights (IER) has already published its Manifesto for the next government on how wages, working conditions and the economy can be improved in a sustainable and fair way.

In our publication Reconstruction after the crisis: a manifesto for collective bargaining, Chair of the IER John Hendy QC and President Professor Keith Ewing make a thorough historical and legal argument for government policy, encouraging a sectoral system of negotiating pay and working terms with trade unions.

Hendy and Ewing set out a flexible and long-term vision, explaining how incentives such as requiring companies to have a collective agreement with their workers in place before they can bid on public contracts, could improve collective bargaining on a national scale.

Labour has already given backing to the introduction of a living wage, and the IER welcomes this as one step towards a more sustainable economic model, in which wealth is pre-distributed more evenly throughout society rather than being siphoned off to the richest as is the case today.

However, we do not believe setting a living wage goes far enough. Collective bargaining enables unions and employers to work together, rather than against each other, in order to set realistic wages, conditions and workplace training that will upskill Britain's workforce and ensure money is more freely circulated within the economy, thus providing support to small businesses.

As a well-used response to economic crisis and an accepted method of stabilising the economy in the long-term, collective bargaining has been a historical success in the UK, the US and across Europe. Indeed, some of Europe's largest and most resilient economies – including Germany – base their labour law on negotiation between workers and employers, allowing the country's wealth creators (and that means workers, not just bosses) to agree a fair deal among themselves rather than relying on a so-called "free market", which seeks only to put downward pressure on wages.

Providing space for some pushback from workers is a way of regulating corporatism in order to prevent the excesses of shareholders and other profiteering influences from destabilising the national economy and leaving the majority very little while the country's wealth is enjoyed by just a few.

Indeed, the fall of collective bargaining in the UK is something of an ideological hangover from the Thatcher years, when anti-union policies were instilled into the nation's laws.We have now seen the end result of neo-capitalism in the form of the financial meltdown of 2008, where the risks taken by the wealthy crippled the poor.

The left needs a new plan of action that will answer the public's calls to fight corporate greed and build an economy that provides for all. It is our belief that stimulating the economy through the tried-and-tested method of greater collective bargaining can make for a bright new future with a reduced risk of recurring economic collapse. It will lead to new jobs, lower public spending on welfare (most significantly the large proportion of the benefits spend that goes to topping up poverty wages to enable workers to afford the cost of living) and a better-skilled workforce that will attract the best employers.

And it is not only the IER who believe in this route as a viable alternative to austerity. Our Manifesto for Collective Bargaining has been backed by 15 major unions so far, including Unite, Unison, GMB, NUT, NUJ, PCS, CWU, ASLEF, BECTU, AEP, ATL, RMT, UCU, TSSA and POA.

General Secretary of GMB Paul Kenny explained: "Collective bargaining not only raises the pay and conditions of current workers, but also helps to create new jobs and strengthen the economy as a whole.

"The government boasts about an illusory rise in employment. In reality, desperate people are being forced into precarious jobs on poverty pay.

"Such a small amount of capital spread thinly between thousands of workers does nothing for employees and nothing for our economy.

"Collective bargaining will lift wages and boost the economy.

"So let's go beyond empty statistics and create real employment that makes a real difference to life in the UK. Let's face it, Britain needs a pay rise."