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Lord McCarthy: My Lords, the noble Baroness is talking about America and nowhere else. Would she make the same remarks about the minimum wage legislation in Germany, Belgium, Switzerland or Austria? Has that been as low as in America?
Baroness Miller of Hendon: My Lords, the noble Lord should wait until I have finished my speech. However, in view of what he said, perhaps I should remind him--I am sure he would agree--that 20 per cent. of American workers work at below the minimum wage
As I was saying, one of the reasons is because of our low tax rates, as Chancellor Kohl himself admitted when he met the Prime Minister last Friday. The second reason is because of our flexible labour market. The last one is--and some noble Lords opposite may choose to laugh at it--that it is because of our lower labour costs. But it is not because we are "the sweat shop of Europe", as the Labour Party and the unions contend. Our basic wage levels compare favourably with other industrialised parts of the EC. The difference is our smaller social on-costs, the price of the social chapter.
If the United Kingdom's unit labour costs are taken as 100, then Germany's are nearly double at 199, Switzerland's are 188, France's are 131 and Italy's are 123. The evidence from the OECD supports the view that the more flexible labour markets of the United Kingdom, the United States and New Zealand show lower unemployment rates than the highly regulated labour markets of France, Italy and Spain.
Germany, which until recently had low unemployment rates due to its undoubted superiority in education and training skills, is now also sliding down the unemployment slope. The Institute of Directors complains that the EU is over-regulated and increasingly uncompetitive with the rest of the world. The Far East continues to develop dynamically, and while no one suggests that we should reduce our labour costs to those of the third world, what we do not have to do is to hand them any sort of competitive advantages.
Ross Perot warned during the 1992 American election of American jobs slipping across the border to Mexico, and with the establishment of the North American Free Trade Area, that is exactly what has happened in parts of the American car industry.
We have all the former east European satellite states just waiting to take our jobs. Because, let us make no mistake about it, every authoritative study on the subject confirms that the minimum wage will cost jobs. In a sudden outburst of candour which he must be tired of having quoted against him, the Deputy Prime Minister admitted that "any silly fool" knew that a minimum wage would result in job losses.
As I said, a minimum wage not only causes job losses, but it prevents job creation in the first place. Let me give an example from one of the professions where the sums are much higher than the sort of figures that even the TUC is talking about. I refer to the Minister's profession. There are hundreds of law graduates seeking what are now called "training contracts". They used to be called "articles" or "articles of clerkship". There are also a large number of small firms of high street solicitors in general practice who used to provide such places but cannot afford to do so because of the minimum wage set by the Law Society. A graduate cannot work for less, even though his or her parents who have supported them through university are prepared to continue to do so through what amounts to postgraduate studies.
Many people--my husband was one and so, I imagine, was the Minister--are prepared to accept jobs that are not well paid at the beginning of their working lives partly because they live at home and do not have high expenses but, more importantly, because they realise that one way to obtain a good job is to accept one that is not so good and work their way up.
The CBI, in its evidence, pointed out that even a modest minimum could lead to job losses unless wage differentials are squeezed. And there we come to the next point. I note that the Minister mentioned differentials when he started his speech, but the fact remains that it is meat and drink; the very stuff of life for the trade unions. "If an unskilled newcomer trainee gets £X, then my members must get £X times Y", and there we will be off in another round of inflationary wage increases, with wages going up without any increase in productivity. Another turn of the screw of uncompetitiveness.
There are still many unanswered questions about the Government's proposals for a national minimum wage. My honourable friend the Member for Daventry asked them for a final time on the Third Reading in the other place. I will not take up your Lordships' time by
The most important of all the unanswered questions is at what level the minimum wage is going to be set. The Secretary of State tells us that we must wait until the Low Pay Commission reports. The Minister told us the same. In other words, we have to sign another of Labour's blank cheques to approve the principle and procedures for a national minimum wage without knowing how much it will be and without being able to assess its effect on jobs, on industry and on competitiveness generally. Perhaps the Minister can tell your Lordships' House when the commission's report will be published. If he cannot do so today, will he please write to me?
The Bill gives the president somewhat convoluted powers to create exemptions, but those are far from clear. The Government refused in the other place to exempt directors who, for all sorts of reasons, in their own family businesses might not want to draw wages. What about family members like wives or children helping out in the family business for nothing or pocket money or pin money? Are they going to result in the owner being prosecuted?
Why will the Minister not take clear and unambiguous powers to create exceptions by statutory instrument when, in what is after all an experimental regime, there are bound to be anomalies and inconsistencies? Is it the case that she wishes to have the option if she chooses to hide behind the commission, by insisting that Parliament accepts whatever they recommend.--"It is not my fault, Guv!". Parliament should be supreme and not the rubber stamp for this newest quango.
Let us look at the composition of the Low Pay Commission. Three of the nine members are university economists who are indirectly on the government payroll and who have a strong Labour background; three of the nine are trade union officials or senior union executives; and three of the members represent trade and industry. One comes from the CBI, which represents large companies, one from the Grenada Group and the other from the Scottish Grocers Federation. Presumably this last gentleman can be described as representing small businesses, but as these will be the ones hardest hit by and probably driven out of business by a national minimum wage, the commission can hardly be described as a well-balanced organisation.
The Minister of State in the other place proudly announced the support of Tesco for a national minimum wage. I am sure the fact that that would knock another nail in the coffin of the small corner grocer did not even enter into their considerations.
Then there is the vacillation of the Government over precisely who should or should not be affected by the national minimum wage. Their manifesto allowed for no exemptions. In the President of the Board of Trade's second sentence in the Second Reading in the other place she said,
Sections 3 and 4 of the Bill give power to exempt persons under the age of 26. At the Amsterdam summit, the Prime Minister endorsed the presidency's conclusion that wage agreements across Europe should take more account of differences in qualifications and regions to facilitate job creation. The Minister of State said on 20th November that there should be no regional, sectorial or company derogations. Exactly one week later, when the Bill was first published, there were special arrangements for share fishermen and agricultural workers in addition to those for 16-25 year olds. The Government also realised that they had to give themselves an exemption from the Act as the employer of the Armed Forces!
Although we still have to await the result of the deliberations of the Low Pay Commission before we know what a minimum wage is, the Government have been conducting their own internal Dutch auction with kites being flown at figures from £4.61 down to £3.50. All higher than the USA. My right honourable friend the Member for Wokingham twice asked in the other place whether a waitress on £3 per hour with free accommodation and meals is better or worse off than a factory worker living in Central London on £4.50 per hour or a barman living in Liverpool on £4 an hour with free food.
The President of the Board of Trade has expressly forbidden the so-called independent low wages commission to take regionality into account. Why not? Perhaps the Minister in his reply will tell us the justification. My honourable friend Mr. David Maclean pointed out that a national minimum wage will harm employment in Cumbria, where the cost of living and other expenses are lower. Why should anyone start a business in that beautiful but remote part of the country with limited transport facilities when, for the same money, they could do so somewhere else?
It was suggested that low wages were being subsidised by the taxpayer in the form of family credit, now being abolished by the Budget. But in fact only 12 per cent. of people receive family credit for more than a year, and the completely independent Institute of Employment Studies reported that,
I am not sure what effect the new working family tax credit will have on the national minimum wage. I suspect it may make it irrelevant. But perhaps the Minister will be able to enlighten us in his speech.
Where the taxpayer will be affected--because of the adverse effect the minimum wage will have on employment--will be through more unemployment, more jobseekers' allowances to be paid and less tax revenue coming in. How do the Government reconcile their attack on what they call low wage-paying employers with their welfare-to-work policy, where there will be a combination of wages and public subsidy?
It is impossible to assess the effect of a minimum wage on a growing, prosperous economy, but the effect on one that is slowing down will clearly be adverse to jobs. Employers will seek to replace human workers with machinery that does not need wages, pensions or holidays. Every one of your Lordships who has filled his car at a self-service petrol station has helped to destroy the unskilled jobs that used to be available. Every one of your Lordships who has ever used a cash machine at a bank has helped to deprive someone of a clerical job in that bank. The dangerous social effects of unemployed and unemployable youth cannot be overstressed.
I said earlier that because of the myth of the mandate the Government will get their Bill. Nevertheless, the Opposition still oppose the principles of the Bill. We believe that it will be damaging to jobs. A study by the Department of Trade in 1996 suggested that, at £4.15 an hour, which the unions were then demanding, assuming a half restoration of differentials, the job loss will be almost 1 million. A minimum wage is recognised by the Institute of Directors and the CBI as damaging to our buoyant economy. It will add to inflation. It will damage our competitiveness. It will not help the lowest paid in society. On the contrary, countries that have a minimum wage find themselves with a list of derogations growing year by year, as different groups have asked their legislators for exemptions because of the harm being done to their particular trade or industry.
I repeat what I said earlier because it needs to be stressed. A major defect in the Bill is that it does not give the President of the Board of Trade clear power to provide further exemptions if they are found to be necessary. If, as we fear it will, the minimum wage results in rising unemployment, the Government will bear the sole responsibility. It will give us no satisfaction whatever to say that we told you so.
Lord Razzall: My Lords, I do not know whether it will be any comfort to the Minister if, speaking on behalf of the Liberal Democrat Benches, I indicate that I entirely disagree with the tone and virtually all of the content of the speech we have just heard from the noble Baroness, Lady Miller of Hendon. Furthermore, I do not know whether it will give him any assurance to know that in saying that, contrary to the assumption the noble Baroness makes, I never have been, never will be or ever could be described as Old Labour.
We believe that for far too long the previous government tolerated the practice of cowboy employers exploiting their workforce with the taxpayer, whom the noble Baroness's party always professes to defend, having to pick up the bill. We all have our anecdotal evidence of that and we could all produce our stories about outrageous exploitation of workers on low pay. The best example I have relates to the enormous recent profits made by various of the owners and entrepreneurs who invested in the train operating companies compared with the wages that are currently paid to the men and women who walk up and down the trains providing us with the drinks and food that we have from the buffet cars. Their average hourly wage is infinitely less than any rate the minimum wage will be set at by the Low Pay Commission. If one juxtaposes those wages with the enormous wages that are being paid to those who are operating those companies, one sees that this is a significant problem which the Tory Opposition ignore at their peril.
I find it very strange as well that the Conservative Opposition have consistently opposed the introduction of a minimum wage, although, to be fair to them, they opposed it during their period in government. But we are the only serious industrial country in the western world that does not have some form of minimum wage legislation. The noble Baroness made much of the experience of the United States. Of course it is the case that if the minimum wage were to be set too high there would inevitably be some effect on jobs. However, six out of the seven recent studies that have been conducted in the United States, in regions as diverse as New Jersey, Texas and California, indicate that employment in the low wages sector and areas where the minimum wage has been monitored has increased recently by as much as 20 per cent. There is certainly no significant opposition among American economists to the minimum wage. So I think the American experience certainly does not prove the point which the noble Baroness made.
We on this side of the House by and large support the introduction of the Bill. We have welcomed the establishment of the Low Pay Commission. We advocated for some years that we should establish the Low Pay Commission and so we welcome that. We welcome the exclusion of volunteers from the provisions of the Bill. There was a good deal of debate in another place with regard to volunteers. Significant issues were raised by our side and we are pleased that, as a result of the amendments that were accepted by the Government in another place, the position of volunteers has been clarified.
We are also particularly pleased about the significant development that took place regarding agency workers, part-time workers and home workers. It has for long been a scandal in this country that those groups of workers, who are often paid £1 an hour or less, have been significantly exploited by employers. We all know of examples of that. We are pleased that the Government have taken on board that point and, in framing the legislation, are looking to deal with it.
Having said that, noble Lords would not expect me to indicate that we would not wish to improve the Bill as it passes through this House. The major substance of the amendments which we shall bring forward will concern the point on which the Minister touched in his speech. I listened carefully to what he said but we still remain convinced that there needs to be a further provision to permit a regional variation of the minimum wage.
The case can be put very simply. I shall not detain the House, because the arguments have been made extensively and we shall seek to make those arguments again as the Bill proceeds. However, let us assume for the sake of argument--those who have read the press may know as little as or more than the Minister--that the minimum wage is set at around £3.50 an hour. The figures from the Office for National Statistics demonstrate that there is significant variation on a regional basis between the average income of people in relation to £3.50 an hour. For example, in the north east region 8.4 per cent. of the working population earn less than £3.50 an hour. In the south west the figure is 6.8 per cent. while in London it is 2.1 per cent. Thus it is clear that more than three times as many people as a proportion are earning less than £3.50 in the north east than in London.
Let us look at the figures for government departments, which are, after all, under the control of the Government. Answers obtained to questions in another place to tease out exactly what are government wage rates at the bottom end show that the lowest payer is the Department of the Environment, Transport and the Regions, which on average pays about £3.25 an hour. However, the average lowest rate in a government department in London is £4.30 an hour. So already within government departments there is a significant variation on a regional basis as to the minimum rate that is being paid.
Our case is that we believe that the Government are making a mistake in not authorising the Low Pay Commission, in making its recommendation as to a minimum wage, to introduce a regional variation. We understand the arguments that have been put forward. Broadly speaking, the Minister in the other place was quite clear about the first one. He said in terms that it was in their manifesto that they were not going to have a regional variation and therefore there will not be one. I accept that the Salisbury Convention applies so far, but I am not sure whether in this House it applies in requiring me not to argue the intellectual case for a regional variation.
The second argument which the Minister put forward is that it is very difficult to implement a regional variation. Our answer would be that that is something which the Low Pay Commission should be empowered to look at. It may well say that, for all the reasons we have looked at, there should be one national minimum rate. However, in this Bill the Low Pay Commission should be given the opportunity to look at that rate and the regional variation.
We believe, and have argued quite strongly in the other place, that the issue which the noble Baroness touched on--namely, that of young people and training and whether 26 is the right age to provide the cut-off for the minimum wage--should be looked at again. There are some very difficult issues. We would like to bring forward some suggestions in Committee as to how they should be dealt with. We are not sure that 26 is the correct cut-off age, nor are we sure that the Bill is going to make appropriate provision to ensure that the kind of training example which the noble Baroness described is properly taken into account in the Bill.
Although significant progress was made in another place as regards the status of the Low Pay Commission, we argue that we should go further at this stage. The Government are indicating that they would wish the Bill to contain powers for the commission to become a statutory body with permanent effect. We believe that there are so many issues thrown up by the minimum wage legislation and its imposition that it is clear that the Low Pay Commission should now have permanent effect. We would like the Bill to make provision to have various items referred specifically to the commission, including a regular review of the economic impact of the minimum wage. That should also include, in the light of the Minister's remarks, the impact of gender differentiation and the minimum wage. We are concerned that unless the Low Pay Commission has permanent status, the issue of equality between men and women's pay will become lost as we attempt to monitor the effects of the minimum wage. For that and many other reasons, we shall seek to bring in amendments to ensure the confirmation of the Low Pay Commission as a fully effective statutory body.
We are concerned about the status of the secondary legislation that is clearly going to be brought forward to give this Bill teeth. As the noble Baroness has indicated, to some extent we are debating the Bill in a vacuum. The issues which many noble Lords would wish to raise would be entirely different were the minimum wage to be set at £3 compared with £4.50 or £5. Many of the arguments about unemployment, regional variation and the gender gap--somebody's pager has gone off. I am sorry my Lords, it is mine!
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