Tactical tit-for-tat over the minimum wage

Last week, the Liberal Democrats accused the Tories of “nicking” their ideas amid signs of a Tory push for a substantial rise in the minimum wage. Treasury minister Sajid Javid says there is a “strong case” for an increase, since the £6.31 rate is 10% below 2008 levels in real terms, says Sam Coates in The Times.

George Osborne says a rise would be welcome, but also cautioned against “self-defeating” increases if they came at the expense of jobs. This is a “cynical” attempt by the Tories to “buff up” their caring image, says Simon Heffer in the Daily Mail.

Driving up employment costs when two million people are unemployed and increasing numbers of Europeans are coming to the UK to seek jobs would simply keep “other people on the dole”.

The Tories aren’t the only ones looking for “easy headlines”, says Kamal Ahmed in The Daily Telegraph. Ed Miliband has said that any business that pays the higher ‘living wage’ (£8.55 an hour in London) would receive a 12-month tax break under a Labour government. But the “parameters of the debate… are far too limiting”.

Big firms tend to keep salaries in check and give an incentive to staff through profit-sharing schemes. This keeps workers’ pay above the minimum wage, but is a “sophistication often missed in average UK pay data”.

There are a number of “quite compelling reasons” for upping the minimum wage, not least the Henry Ford principle that employees need to be paid enough to buy the products they are making, says Jeremy Warner in The Daily Telegraph. An increase in pay would boost demand, “setting in train a virtuous circle of growth”.

It would also increase the incentive to work and help to reduce the welfare bill. It is “plainly crazy – at a time when company profits take up a record share of national incomes” – that wages have to be “topped up by the state” to provide the low-paid with an acceptable standard of living.

That said, there are better solutions than raising the minimum wage – for example, taking the low-paid out of tax altogether. Yet instead of such blue-sky thinking, we see only “tactical tit-for-tat politics”.

• Stay up to date with MoneyWeek: Follow us on TwitterFacebook and Google+

MoneyWeek magazine

Latest issue:

Magazine cover
The dollar's going up

Why your British stocks will follow

The UK's best-selling financial magazine. Take a FREE trial today.
Claim 4 FREE Issues

Hedge fund manager Hugh Hendry: 'It felt like the sun rose only to humiliate me'

In a series of three short videos, Merryn Somerset-Webb talks to Hugh Hendry, manager of the Eclectica hedge fund, about everything from China to the US, Europe, and Japan.


Which investment platform?

When it comes to buying shares and funds, there are several investment platforms and brokers to choose from. They all offer various fee structures to suit individual investing habits.
Find out which one is best for you.


18 December 1912: Piltdown Man – the 'missing link'

One of the world's greatest scientific hoaxes took place today in 1912, with the presentation of human evolution's missing link to the Geological Society in London.