The TUC has chosen its moment well. With Britain gripped by a cost of living crisis, the umbrella body for trade unions has called for the minimum wage to be raised from £9.50 to £15 an hour as soon as possible, and by 2030 at the latest.
It is an ambitious target, as the TUC openly accepts. The minimum wage is now 64% of median earnings. A £15-an-hour minimum wage by 2030 would be 75% of median earnings, the highest of any of the 38 members of the Organisation for Economic Co-operation and Development group of rich countries.
Inevitably, the TUC’s proposal will prompt warnings that higher pay will come at the expense of jobs. But this argument has been deployed ever since Tony Blair’s government introduced the minimum wage in 1999 at £3.60 an hour. The massive job losses predicted then have not happened and there has been no trade off between tackling poverty pay and employment.
In large part, that is because increases in the minimum wage have been gradual over the past quarter of a century. The Low Pay Commission, the tripartite body that recommends the level at which the minimum wage should be set, has continued to push the boundaries to see how high the wage can go without any deleterious effects. Its conclusion is: so far, so good.
The Conservative party, which strongly opposed the minimum wage when it was first introduced, quickly changed its mind and in 2016 replaced it with a “national living wage”, explicitly linking the rate to average earnings for the first time. A target was set for the pay floor to reach 60% of earnings by 2020, which has since been raised to 66% by 2024. The TUC says a 75% target is the “logical next step”.
A review by the Low Pay Commission of the first five years of the national living wage found that for those benefiting, pay rose by 26%, more than double the median hourly pay and much faster than inflation over the same period (about 8%). The commission said the policy had “increased hourly and weekly pay for the lowest-paid workers at an ambitious pace”, adding that “it did so with minimal effect on employment and hours”.
The national living wage was also supposed to lead to higher productivity, but here the results have been disappointing. Gains have been harder to achieve than expected, in part because smaller firms paid for higher wages by cutting investment. There was also evidence of some firms making their staff work harder to improve productivity.
Achieving a £15-an-hour minimum wage by 2030 would, the TUC says, require increases of 3.8% a year after 2024 – the same rate at which median earnings grew annually between 1997 and 2009.
For its campaign to be successful, however, the TUC will need to get one of the two main political parties to set the Low Pay Commission the task of charting a path to £15 an hour. Neither the Conservatives nor Labour seem ready to go that far.
