Not sure if anybody noticed this last week but it has caused a bit of a stir in Conservative circles. Matthew Hancock who is Minister for Skills in BIS and one of the new generation of upcoming Tories (he's only 34), has made a speech on targeting low pay, where he has called on the Conservatives to be 'strengthening the minimum wage'. Now you may think this is a bit of cynical posturing with a few non-commital soundbites, but his speech is a direct challenge to prevailing Tory thinking, in a number of areas, and for a Minister to be breaking ranks over this is quite significant. Some quotes you may find interesting. First, some facts about income inequality since Thatcher's era, that you don't often hear a Tory mentioning: Quote Since 1986 real hourly earnings have grown by 62%. The greatest beneficiaries of this by far have been the top 1% of earners, who have seen their pay more than double. By contrast, the bottom fifth saw growth of just half, and the middle by less still. From 2003 to the crash in 2008 median pay was completely flat. Meanwhile GDP grew by 11%. The boom in GDP was characterised by rising youth unemployment, stagnant earnings, and mass immigration to fill skills shortages. If you were in the lower half of the earnings spectrum, you might have wondered how the growth had passed you by.'" Quote Just as in the past I’ve argued that the centre-right needs to act on unjustified high pay, on ending the rewards for failure we saw at the top, so we must act on unjustified low pay at the other end of the spectrum.'" Then Hancock went on to talk about leisure time being more important than just accumulating money: Quote Now I love my job, and work a humungous number of hours. And while many people in this room might do the same, let me let you into a secret: we’re unusual. Working more hours may be a necessary thing, but it’s not necessarily a good thing. It means less time to see the family; less time in the garden. Less free time. I’m in favour of more freedom. If the cardinal sin of modern economics is assuming that markets are always rational, then the second great failing is forgetting who we’re in it for. '" Now this is where he starts getting quite controversial, with loaded comments against some of his comrades: Quote Likewise, some argue that lower labour costs are good for competitiveness. But hearing on the news that that Britain has the lowest unit labour costs in the G8, isn’t much consolation if you’re out of work and you want more for your family than a weekly cheque from the DWP.'" And then Hancock goes on to rubbish the common myths about the minimum wage being bad for employment: Quote First, the clearest rule governing low pay is the minimum wage. Some argue that the minimum wage is bad for the economy because it damages our competitiveness. We have relatively high pay compared to the rest of the world, and to compete we must keep our costs low. Now I'm passionately in favour of making Britain more competitive. But we want to be competitive so people can be better paid. What is competitiveness for, if it's not to make us more prosperous and free? The standard argument against the minimum wage is that a minimum wage would price people out of jobs. But the academic analysis doesn’t back it up. The analysis of the impact of minimum wages is one of the most studied areas of economics. There are so many studies that economists now publish studies of studies, bringing all the data together. Two of the most recent, which together analysed 91 studies, found that “the minimum wage has little or no discernible effect on the employment prospects of low-wage workers.” Many reasons are cited by the study, including increased pay raising the efficiency of the workforce, and the very small impact of minimum wage increases on the total pay bill. After all, work is a team effort. Working out how much of a firm’s revenue is down to which member of the team is an imprecise art at best. Just as with high pay, the question of just rewards is important.'" At the moment a lot of Tories are posturing and positioning themselves to the right, anticipating a right-wing challenge to Cameron, Hancock is taking a bit of a political risk here putting his head above the parapet, of course on the Conservative blogs he is being torn to shreds as a heretic. Looking at his background he is a former Bank of England economist and his speech makes a lot of sense to me. Time will tell whether he gets shot down and shifted out of government before long but he might be the type of Tory that 'gets it' on social inclusion and wants to move the party back in the One Nation direction it had been under Churchill or MacMillan. The full speech is posted on his website www.matthewhancock.co.uk/campaig ... ion-speech

Not sure if anybody noticed this last week but it has caused a bit of a stir in Conservative circles. Matthew Hancock who is Minister for Skills in BIS and one of the new generation of upcoming Tories (he's only 34), has made a speech on targeting low pay, where he has called on the Conservatives to be 'strengthening the minimum wage'. Now you may think this is a bit of cynical posturing with a few non-commital soundbites, but his speech is a direct challenge to prevailing Tory thinking, in a number of areas, and for a Minister to be breaking ranks over this is quite significant. Some quotes you may find interesting. First, some facts about income inequality since Thatcher's era, that you don't often hear a Tory mentioning: Quote Since 1986 real hourly earnings have grown by 62%. The greatest beneficiaries of this by far have been the top 1% of earners, who have seen their pay more than double. By contrast, the bottom fifth saw growth of just half, and the middle by less still. From 2003 to the crash in 2008 median pay was completely flat. Meanwhile GDP grew by 11%. The boom in GDP was characterised by rising youth unemployment, stagnant earnings, and mass immigration to fill skills shortages. If you were in the lower half of the earnings spectrum, you might have wondered how the growth had passed you by.'" Quote Just as in the past I’ve argued that the centre-right needs to act on unjustified high pay, on ending the rewards for failure we saw at the top, so we must act on unjustified low pay at the other end of the spectrum.'" Then Hancock went on to talk about leisure time being more important than just accumulating money: Quote Now I love my job, and work a humungous number of hours. And while many people in this room might do the same, let me let you into a secret: we’re unusual. Working more hours may be a necessary thing, but it’s not necessarily a good thing. It means less time to see the family; less time in the garden. Less free time. I’m in favour of more freedom. If the cardinal sin of modern economics is assuming that markets are always rational, then the second great failing is forgetting who we’re in it for. '" Now this is where he starts getting quite controversial, with loaded comments against some of his comrades: Quote Likewise, some argue that lower labour costs are good for competitiveness. But hearing on the news that that Britain has the lowest unit labour costs in the G8, isn’t much consolation if you’re out of work and you want more for your family than a weekly cheque from the DWP.'" And then Hancock goes on to rubbish the common myths about the minimum wage being bad for employment: Quote First, the clearest rule governing low pay is the minimum wage. Some argue that the minimum wage is bad for the economy because it damages our competitiveness. We have relatively high pay compared to the rest of the world, and to compete we must keep our costs low. Now I'm passionately in favour of making Britain more competitive. But we want to be competitive so people can be better paid. What is competitiveness for, if it's not to make us more prosperous and free? The standard argument against the minimum wage is that a minimum wage would price people out of jobs. But the academic analysis doesn’t back it up. The analysis of the impact of minimum wages is one of the most studied areas of economics. There are so many studies that economists now publish studies of studies, bringing all the data together. Two of the most recent, which together analysed 91 studies, found that “the minimum wage has little or no discernible effect on the employment prospects of low-wage workers.” Many reasons are cited by the study, including increased pay raising the efficiency of the workforce, and the very small impact of minimum wage increases on the total pay bill. After all, work is a team effort. Working out how much of a firm’s revenue is down to which member of the team is an imprecise art at best. Just as with high pay, the question of just rewards is important.'" At the moment a lot of Tories are posturing and positioning themselves to the right, anticipating a right-wing challenge to Cameron, Hancock is taking a bit of a political risk here putting his head above the parapet, of course on the Conservative blogs he is being torn to shreds as a heretic. Looking at his background he is a former Bank of England economist and his speech makes a lot of sense to me. Time will tell whether he gets shot down and shifted out of government before long but he might be the type of Tory that 'gets it' on social inclusion and wants to move the party back in the One Nation direction it had been under Churchill or MacMillan. The full speech is posted on his website www.matthewhancock.co.uk/campaig ... ion-speech

Interesting.

It never ceases to amaze me how people just don't seem to 'get' the issue of low pay.

There's a clear business case for paying decently, as stated by a speaker from KPMG at a conference I attended last year, explaining why that company had become a living wage employer.

Apart from cleaners and possibly the odd trainee receptionist, would KPMG have that many minimum wage employee's. A good stance to take never the less.

I suppose the main objectors would be the factory employing 100 workers having to fork out an extra quid an hour amounting to £4k a week.

Well said by Mr Hancock.
The economy is a tool for the well-being of the people, not the other way round.

Unfortunately for him, he'll get sidelined for speaking out.
One does wonder though, if he has those views, why he's a tory?

I suspect most factories in the UK already pay over the living wage.

It is very much something that impacts on cleaners – and a lot of support staff, in education, for instance. KPMG is not the only big company who have gone down this route – IIRC, so has Barclays.

As Barbudo says, he'll get sidelined, but it helps to move the subject away from being viewed as such a tribal one. His citing of the research into the impact of the minimum wage is particularly interesting.

[url=http://blogs.telegraph.co.uk/finance/jeremywarner/100023849/minimum-wage-should-be-substantially-raised-not-cut/Even the Torygraph comes out in favour of raising NMW[/url

it's a decent article. Interesting that there is some support for Hancock.

The comments are a mixed bag too – certainly not all damning of the idea.

Indeed, the fact that some businesses may fail is not a valid reason to keep a significant proportion of the workforce in penury and reliant on state backhanders to pay their rent or put food on the table. An increase in earnings would be offset by a reduction in tax credits but at least those in work would be earning more for themselves.

As for the number of small shops that may fail as a consequence of paying increased wages, they will be relatively insignificant when compared to small shops that closed as a consequence of targeted price cuts by supermarkets

If they really want to "make work pay" they should ... erm ... [umake work pay[/u, instead of forcing JSA recipients to work at virtually no cost to the employer.

It costs KPMG next to nothing to be such an employer! So, not a great example. Effectively a bit of PR. The vast majority of their staff have always been way over a living wage threshold. They may have needed to up a couple of support staffs wages but such costs would be incidental and easily covered by sweating their professional human capital further.

Read the OP properly – and even the linked-to speech in full – and the [iTelegraph[/i article.

If IIRC KPMG & Barclays also insist that any contractors pay the Living Wage too, I expect there's a fair few of them. Unfortunately John Lewis Partnership are still resisting any moves to ensure their contractors pay Living Wage, which does seem at odds to their own fair remuneration model

Indeed.

KPMG are unlikely to use lower paid contractors in any number so it's an easy preach for them.

As to JL, it would probably destroy their business model if they did.

So, security guards, cleaners, canteen staff etc won't add up to a significant number?



How do you work that one out?

Quote ="sally cinnamon"Not sure if anybody noticed this last week but it has caused a bit of a stir in Conservative circles. Matthew Hancock who is Minister for Skills in BIS and one of the new generation of upcoming Tories (he's only 34), has made a speech on targeting low pay, where he has called on the Conservatives to be 'strengthening the minimum wage'. Now you may think this is a bit of cynical posturing with a few non-commital soundbites, but his speech is a direct challenge to prevailing Tory thinking, in a number of areas, and for a Minister to be breaking ranks over this is quite significant. Some quotes you may find interesting. First, some facts about income inequality since Thatcher's era, that you don't often hear a Tory mentioning: Then Hancock went on to talk about leisure time being more important than just accumulating money: Now this is where he starts getting quite controversial, with loaded comments against some of his comrades: And then Hancock goes on to rubbish the common myths about the minimum wage being bad for employment: At the moment a lot of Tories are posturing and positioning themselves to the right, anticipating a right-wing challenge to Cameron, Hancock is taking a bit of a political risk here putting his head above the parapet, of course on the Conservative blogs he is being torn to shreds as a heretic. Looking at his background he is a former Bank of England economist and his speech makes a lot of sense to me. Time will tell whether he gets shot down and shifted out of government before long but he might be the type of Tory that 'gets it' on social inclusion and wants to move the party back in the One Nation direction it had been under Churchill or MacMillan. The full speech is posted on his website www.matthewhancock.co.uk/campaig ... ion-speech'" I may be a cynic but though it's a nice speech, why say it now?? Maybe to enforce the message that the torys are for strivers not shirkers? and that although they have been forced to teach the poor a lesson for being on benefits, they are a good lot really, who have working people's interest at heart. Pull the other one.

Quote ="sally cinnamon"Not sure if anybody noticed this last week but it has caused a bit of a stir in Conservative circles. Matthew Hancock who is Minister for Skills in BIS and one of the new generation of upcoming Tories (he's only 34), has made a speech on targeting low pay, where he has called on the Conservatives to be 'strengthening the minimum wage'. Now you may think this is a bit of cynical posturing with a few non-commital soundbites, but his speech is a direct challenge to prevailing Tory thinking, in a number of areas, and for a Minister to be breaking ranks over this is quite significant. Some quotes you may find interesting. First, some facts about income inequality since Thatcher's era, that you don't often hear a Tory mentioning: Then Hancock went on to talk about leisure time being more important than just accumulating money: Now this is where he starts getting quite controversial, with loaded comments against some of his comrades: And then Hancock goes on to rubbish the common myths about the minimum wage being bad for employment: At the moment a lot of Tories are posturing and positioning themselves to the right, anticipating a right-wing challenge to Cameron, Hancock is taking a bit of a political risk here putting his head above the parapet, of course on the Conservative blogs he is being torn to shreds as a heretic. Looking at his background he is a former Bank of England economist and his speech makes a lot of sense to me. Time will tell whether he gets shot down and shifted out of government before long but he might be the type of Tory that 'gets it' on social inclusion and wants to move the party back in the One Nation direction it had been under Churchill or MacMillan. The full speech is posted on his website www.matthewhancock.co.uk/campaig ... ion-speech'" I may be a cynic but though it's a nice speech, why say it now?? Maybe to enforce the message that the torys are for strivers not shirkers? and that although they have been forced to teach the poor a lesson for being on benefits, they are a good lot really, who have working people's interest at heart. Pull the other one.

If it was something like that, then it wouldn't actually help for him to be being rubbished by many on the right for these comments.

If nothing else, this and the [iTelegraph[/i piece help to stop the issue of low wages being seen simply as a politically tribal issue and, therefore, one that is easily dismissed.

The speech was aimed at a Tory audience. Just like some of the other recent speeches from Tories who are positioning themselves for potential leadership challenges by making sure the party rank and file knows they are more to the right of Cameron on various issues.

I suspect Hancock's motivations are:

1. This reflects his views (on which he is not alone in the Tory party, Boris Johnson has also come out in support of the minimum wage), he is probably on the left of Tory party.

2. He is looking ahead and reading the political weather. There is a right wing challenge to Cameron in the offing and he can probably see that is the route to electoral disaster. Hancock is only 34, so about 8-10 years away from being a potential leader, but if Cameron is ousted, the Tories might have a few years rediscovering their right wing agenda and then going the same way they did 10 years ago under Hague and IDS. At that point, the Tories will be fed up of being miles down in the polls and there will be a mood for a "new era" under someone who can swing the party back to the centre ground and make it electable.

Cameron tried to paint himself as this at first but is not authentic and soon flip flopped back to the right. There is, IMO, an electoral market for a centrist One Nation Tory, who can be a bit like Blair was for Labour - be well spoken and from the right social class to keep Middle England onside, but have a political stance that doesn't have it in for the poor, immigrants, groups that the right wing like to target.

The fact that his background is as a Bank of England economist means he will be used to looking at economics through a more 'neutral' lens, so he's more likely to have his policy ideas driven by evidence than by rhetoric which he would have got if his background had been in Tory party HQ.

For decades the Tory party was a sensible centre party that had appeal across the social spectrum and across all regions of the UK. Thatcher really has contaminated the Tory brand, which is why lots of people now instinctively associate the Tories as the enemy and also why probably it tends to attract mostly a right wing audience. Traditional free market conservatives that don't have it in for the poor are probably reluctant Tories these days - when Blair was around, New Labour hoovered up their support.

But although I won't be voting Tory any time soon, I think its more healthy for British politics if you get people in the Conservative party speaking sensibly like Hancock has done here - whether you agree or not with his message, it is not a message of divisiveness or targeting vulnerable groups to seek populist support.

1. Very few on number relative to high earning professional staff. To get the relative handful of support staff to a living wage (if they were ever below it) would be made up very easily from reduced pay rises of a fraction of a percent to professional staff.

2. JL are never knowingly undersold where they sell branded stuff. if they dramatically upped their cost base they could not compete with others. Also, there none comparable products are already expensive and I'm not sure their middle of the road clientele could take significant increases in prices.

Do you seriously believe that?

Really?

JL could probably fund any increase through a ha'penny on a tin of beans or a couple of pence on a pint of milk. Who do you know who actually looks at the price of milk in ANY supermarket, let alone Waitrose?

It could – or arguably even without. It's a very successful business. Which is one of the reasons that it's policy of not putting the cleaners on to the living wage is so irritating. If anything, it may slightly be damaging it's reputation, precisely because the nature of the business means that it is seen as a very fair employer.

I’m not passionate about the MW, either for or against, but I do know it’s an area of economic analysis where people can get the ideologically suitable answer they want (for or against) simply by changing their definition of labour demand. Without going into a long winded explanation there are two fundamental ways that studies look at the issue of labour demand (both normally controlled for other factors):

1) Labour demand as numbers in employment, this is best used if you want to show that raising MW doesn’t lead to lower labour demand. Basically this just shows headline numbers of people who are classed as employed, rather than how much they are working, what they are doing, what they are being paid etc. These studies tend to clearly demonstrate that relatively small changes in MW tend not to result in layoffs.

2) Labour demand as payroll receipts/employment hours. This is best used if you want to show that increases in MW does reduce demand for labour, because this is where you tend to see clearly the numbers of hours worked falling (which could be reductions in contracted hours, short-time, overtime bans, zero hour contracts etc…) with increases in MW. So basically this tends to show MW does affect demand for labour.

You pick the one that suits ideologically and then chalk the other one up as a myth, job done.

The exact same fuzziness about what constitutes labour demand can be used to suit the ideological agenda of choice when it comes to looking at unemployment figures. So people fudge around with categories like “seeking employment”, “economically active”, “underemployed”, and also select in/out different categories of benefit claimants to show that numbers are holding up (yay) or are actually much worse than being portrayed (boo). The really amusing thing is when people unwittingly take internally contrarian views of labour demand depending on what ideological position they’re trying to prop up.

Personally I think it may make good sense for many businesses to pay above the MW if they want to encourage staff retention and want discourage absenteeism, fraud, theft and a whole host of other negative behaviours which may commonly manifest amongst poorly treated workers. However, I find the concept of a defined “living wage” nonsensical given that individual "living" circumstances may differ vastly. However, if margins are so tight that MW is all that can be offered whilst allowing the job to be economically viable then that’s probably better than not having a job at all for a whole host of reasons.

Well he certainly seems more out of that old One Nation sector of the Tory party than the majority in parliament now. In fact I don't class most of them as Conservatives but neoliberal lunatics and that is the problem he faces.

How can you justify ether of those stances? Changes in MW would have to be the only variable in play that affected one of the measures you mention above. For example if it the case we had the number of hours worked falling why would it be possible to lay the blame solely at the door of an increase in minimum wage (had their been one)? Also have their been times when hours have fallen without increases in minimum wage? If so then isn't using the hours worked figures just pure spin?



I think people take unemployment figures with the same pinch of salt as those on inflation.



Well a living wage in the UK is defined as a person working forty hours a week who with no additional income should be able to afford a certain levels/quantities of housing, food, utilities, transport, health care, and recreation. If someone [uworking 40 hours[/u doesn't get paid enough for that then IMO we have a fundamental problem.

I'm not justifying them, I'm just pointing out the two main ways in which MW is analysed, as it is studies based on some variant of these that people use as evidence to support their ideological position on MW, and to claim alternative position to be myth. Also as I pointed out these studies would control for other factors, but that's just basic methodology, so doesn't really add or detract anything from either position.



I agree, you need to be really careful about what precisely is being measured. Same with MW and labour demand.



Yes, but what are these certain levels? It's all a bit abitrary isn't it, albeit no more abitrary than the MW itself? If I'm fit and healthy and have no dependents who is happly to live in a cheap area, then my living wage is going to be different than if I'm a heavy smoker with asthma, who has 10 kids and wants to live in a more expensive area. Also, what about the trade offs people regularly accept i.e. spending more time and money commuting so you can live in a nicer area? It just a bit too flakey for me to take seriously as a standard.