As well as worrying about maximum pay in boardrooms, ministers should look at the minimum wages on the shop floor. If government wants more young people to find jobs it must consider lowering the cost of employing them.
Britain has nearly a million people aged under 25 who are not in education, employment or training — almost one in five of that age group — and schools have just flushed out a new batch of youngsters to join that army. Even those with jobs are twice as likely to be laid off than older staff. Normally when supply exceeds demand the price falls, but the minimum wage introduced in 1999 means labour costs cannot move with the market.
With the minimum due to rise again in October, surely now is the time for a freeze on the rates if employers are willing to take on more staff? And unlike the £5bn programme to get youth off the dole queue, freezing wages cost the state nothing.
No one wants a pay cut, but with inflation negative, even freezing the minimum wage would give an increase. More to the point, it is better to have a job on frozen wages than to have no job - and no wage - at all.
The minimum for workers aged over 22 is due to increase to £5.80 an hour in October with the over-18s rate rising to £4.83 and pay for 16 and 17 year-olds boosted to £3.57. That’s not a fortune but once on the ladder people can gain promotion or progress to higher rates set by the market rather than by ministers. This year, instead of increasing rates it would be better to hold them and increase the number in employment.
Indeed, there is a precedent: the rate for the youngest group was left unchanged between 2004 and 2005.
Unemployment is a serious problem for both the individual and the country, but even if youngsters on lower wages gain jobs at the expense of older people seeking work, that is a long-term gain for the economy because those who fail to obtain employment in their teens and 20s are likely to be jobless throughout their working lives, even when recession ends and demand and supply are in closer balance.
That has social consequences for the people involved and costs for the wider community, including higher taxes on business and those in work.
And the minimum wage is exactly that. Any company wanting to pay more can. But if a condition of a company paying new staff a frozen rate is that the employee must willingly accept it and the employer must take on extra staff, why should government interfere in a contract that is acceptable to all?
However, easing the minimum wage is not an alternative to restraint on top salaries. The pennies saved on the many at the bottom of the pyramid must not be converted into pounds to boost the pay of the few at the top. If the shop floor’s pay packets are curbed, an example from above is essential.
It may be no coincidence that Treasury minister Lord Myners and Financial Services Authority chairman Lord Turner, both advocating curbs on top pay, are past heads of the Low Pay Commission that monitors the minimum wage.
(Pic: Valerie Everett cc2.0)
