Finally someone has said it. I am fed up of hearing all of this talk about work being the only route out of poverty but no one actually talking about the jobs these people are forced to take. Whilst in-work benefits seem to sound fair, why should the government pick up the tab for employers that refuse to pay people properly?

‘But the cost will be much more than £3 billion. This is an expensive way of trying to reduce in work poverty.’

Expensive, yes – but is it effective? You rightly compare it to tax credits but it’s not dissimilar to a guaranteed income either, is it. Apart from the cost do you have any objections on principle?

And weren’t Work Trials a Labour idea? And before dismissing them out of hand I’d like to see what percentage of people given work trials end up with permanent jobs. Provided Work Trials are voluntary and a large proportion of them lead to permanent employment I don’t have a problem with them.

The biggest issue that seems to be identified with these reforms is the need to reduce the welfare trap that comes from means testing. The means test is actually destined to create issues because if the state determines that my situation required an annual income of £6,000 then my disposable income will be £6,000 regardless of whether I work part-time or not.

This is why I support the Friedman vision of a Negative Income Tax as a base for our tax and benefits system, perhaps with a very few additional means tested elements (e.g. a child allowance) that reduce in a very simple manner as income increases in order to provide extra support for the poorest. I believe that we’ve tested to destruction the idea that means testing benefits is the best way to deliver financial support for the poorest and that a new idea is needed, one that ensures that benefits withdrawals do not act as a barrier to work.

I’m rather surprised they’re scrapping the recruitment subsidy though. It doesn’t make sense to pay JSA for people in low paid employment while penny-pinching elsewhere.

And just to clarify: I’ve no problem with spending more to get people into employment if it *effective* in the long term rather than merely *cheep* in the short term.

Well its good to see that the problem of the benefits trap is being addressed. Of course, the devil will be in the detail.

Am I alone in seeing, “payments to external contractors” as just another opportunity to hand over shedloads of public cash to tory business chums?

I completely agree regarding payments to ‘business chums’ – otherwise known as providers. I have heard Theresa May say in one breath that they will pay providers more for those who are harder to help – after saying that those on IB (who, by definition, are harder to help) will be moved onto JSA (thus getting less benefits). So the actual people who are harder to help get less money and the providers get more! Progressive Tories indeed

There isn’t really any talk in his speech about helping people already in low paid jobs to get better jobs and get promotions.

And yet the reason the level of working poverty has risen is because we got lots of people from unemployment into jobs, without following that up to get them better jobs later on.

Several ways to do that are to ensure they are not working long hours, provide an expectation of in-work training, support Trade Union training reps, open up more free education courses for adults, and so on.

Will be interesting to see if IDS plans any such measures, of if he’s more inclined towards treating those on benefits as indentured servants for low-value service sector firms.

margin4error

I think the fact that they have scrapped Train2gain and that they do not mention involving unions at all suggests this is unlikely….

If people on the minimum wage aren’t earning enough to live on, then surely the solution is not tax credits and benefit payments, but rather, to increase the minimum wage?

Or is that too anti-corporation?

Nick

This will reduce jobs – apparently – although there is a tonne of evidence to suggest that the introduction of the minimum wage, which was opposed for this reason, did not affect the level of jobs in the economy at all.

Getting rid of the benefits trap? Good. How IDS is going to do it? Sounds a bit iffy to me. As has already been said the devil is in the detail and I hope that the Lib Dems in his department will stop it becoming just another Tory exercise in screwing over the poor.

When they say penalties for people “who turn down jobs”, what does this even mean? Our system doesn’t work like that. No one who is in the unemployment trap ever gets offered a job. It must be code for being unable to obtain a job, which is a very different thing, and a frightening one. People who are even slightly vulnerable just cannot survive in the modern market.

Tom (iow)
They have left this undefined and will probably continue to do so – so it will be left down to JCP or, more scarily, the providers who are paid if they get someone into work – so it is in their interest to push these people into the worst jobs imaginable just to get their financial reward.

Ah. That is a pretty awful justification, yes.

I did think that perhaps the government could put something towards subsidising some of the cost of meeting a sensible minimum wage, as an alternative to tax credits – but I honestly have no clue on how that might work, or even if it’s a good idea.

As someone with large swathes of “on benefit for life” family (including a cousin who did the stereotype dance and got pregnant in order to get a council house and independence from her parents), I see two major problems – willingness to work, and the availability of jobs around the appropriate levels of experience and qualifications. (I’m primarily talking income support, child support and JSA, here – I’m not familiar with incapacity benefit in any real manner).

There are jobs available for people who’ve never had a job and don’t have anything other than a few D-F GCSEs – but not a great deal. I’ve no idea what proportion of the out-of-work population that is, but it’s certainly the proportion that I feel we should be most concerned about.

Inclination to work is a lot harder. Getting more money when you work than when you don’t is great, but the people of my acquaintance who are in the situation are comfortable enough in what they have. I think it needs a lot more carrot, and maybe a bit of stick.

One thing I’ve been in favour of for quite a while is reducing cash benefits in favour of a voucher-style scheme. The money given in benefits is meant to be for food, clothes and transport, but all too often I’ve seen it going on intoxicants of varying levels of legality instead. So I tentatively wonder whether food stamps are a way forward?

Nick

This boils down to what you think causes long term unemployment – the fact that people are lazy and just don’t want to work or if. In every walk of life there are people who want to cheat the system – not just benefit claimants – but most people are making a sensible economic decision – if they enter work they will be low paid, more likely or not in a dead-end job, in an increasingly insecure market (people on 0 hours contracts etc). We judge all decisions in society on this economic basis why do we judge people on benefits differently? Why do we presume there is something wrong with them? Food stamps sounds very much like treating these people like children. Also, in the US food stamps have led people to having to exchange stamps in stores at an exorbitant exchange rate in order to buy things they cannot get on food stamps.

Alastair Darling . . . increased employment

He’s also the last minister to decrease employment.

@14

So I tentatively wonder whether food stamps are a way forward?

Um, no.

Tom @ 12

When they say penalties for people “who turn down jobs”,

For ‘turning down jobs’ read turning down workfare. Make no mistake, IDS is talking workfare here and we all know it. We know there are not enough jobs to go round as it is. Zero hour contracts, part time work, temp contracts are all the evidence we need. We also know that local/Nation Government are going to axe wholesale jobs as well.

So we need to reduce ‘unemployment’ (not a Tory strongpoint historically)
Cut the public sector (A Tory staple)
Introduce the ‘Big society’

Here is how it will be done.

Close local government services, making people redundant and replace those services with ‘community volunteers’. So you shut the local nursing home and reopen it with 60 quid a week unemployed people (perhaps the same people) renamed community workers, perhaps with overalls emblazoned with:

‘Work shall set you free’

repeat for road sweeping et al and you will fulfil everything of the above, simples! Reduce the numbers of unemployed, reduce public sector and ‘replace’ it with ‘volunteers’ working for the good of the community.

The Tories have been trying to reduce us back to pre Victorian Britain, where workers have no rights, that is no secret, but I will blame the weasel Clegg and his snivelling apologists for this.

Bla bla – I certainly don’t think that everyone who is on benefits is lazy. There’s lots of different groups, and they all need different approaches, I’m sure. It’s just that I grew up among the no-inclination-to-work crowd, and I’d love to see them become more able to get into work or further education -> work. I only narrowly escaped their fate myself…

So, among /that/ subgroup, I see benefit payments aimed for food going towards cigarettes, alcohol and illegal drugs instead. Barring black-marketeering (which happens with milk tokens, so I know it’s a potential problem – but can probably be kept under control in the same ways that selling drink to under-18s is), a food stamp solution smells good to me.

People still get what they need to live, which is what the benefit system is all about after all. Assuming black-marketeering is fairly low, the money actually goes on food and stuff – an important positive point for dependents of whoever receives the benefits.

If you happen to smoke or drink, work also becomes a lot more attractive.

Is it demeaning and paternal and all-around degrading for everyone, and do the (undefined) percentage of people who are on benefits and want a job get done a disservice by the system? Yes and probably, I’d say.

Like I say, it’s an idea that’s been poking around in my head for a while – so I thought I’d air it in this most suitable of forums and see how badly it gets torn to shreds. I’m very much in favour of the welfare system, and I really think it should operate on a benefit-of-the-doubt basis – but I also want it to be effective. I’m a tough cookie to please :p

What’s weird is the obsession with people on minimum wage not having enough money, rather than why living might be too expensive for minimum wage earners.

To be honest I think his ideas definitely will help to make entry-level work desirable to UK residents, but he’s still stuck in 2002 trying to out-Blair Blair and treat the symptoms of the broken society rather than the causes. We need cheaper housing, not more expensive companies.

Sorry this wasn’t really directed at you – I work in this field and this assumption underlies everything we do, even though it is unsaid.

Jim

I agree with you entirely – and this just proves why this is where the fightback needs to start – we need to protect the most vulnerable in society because eroding our rights will make us all at risk of being vulnerable in society which is exactly how it is in the US where there is no welfare state – just a few charities remaining. read lois wacquaint for how this is happening…

Hi Nick,

Food stamps have been tried in various different areas (and asylum-seekers currently get vouchers, which work on a similar principle), and while I can see where you are coming from, I don’t think they would have the effects that you would like to see.

If they are addicted, people will still exchange food stamps for drugs. What they won’t be able to do is to use the food stamps for things like paying the rent or utility bills, buying their children a school uniform or any of the million and one other things that people need to spend their money on, and which people in poverty sometimes have to prioritise over getting enough to eat.

Now instead of food stamps, you could have a smart card or voucher which can be spent on food or various other essentials, but then you have to hire a load of bureaucrats to decide what people should and shouldn’t be allowed to spend their money on, and it also humiliates and stigmatises people to have to use special vouchers in the shops rather than cash.

There are a lot of charities and other projects that work to help people who are addicted to drink and drugs to get into work, it would be better to extend their services rather than introduce a food stamp or voucher system.

@Nick

The thing is, people who are unemployed are already demoralised and stigmatised by everyone from tabloids to politicians to people lucky enough to have jobs. Introducing demeaning vouchers (that would come into all the same admin problems that they did when given to asylum seekers a few years back) would further increase this marginalisation and sense of frustration. If you want to improve the lot of people on benefits then give them jobs and/or training. Not vouchers.

9
Yes, increasing the minimum wage is the best solution for those in work, but just like the previous government, they prefer that the rest of us subsidize cheap labour. Let’s also hope that the net result isn’t the same as Thatcher’s welfare reforms – a significant increase in welfare spending, but I won’t hold my breath.

The problem is that many of the long term unemployed have very little skills and a poor education. However , if one has been brought up in a welfare culture what is the opoint of obtaining an education and skills if the government will look after one? The problem is that poorly educated and skilled people are only likely to obtain low paid work , which with the level of taxation and loss of welfare payments greatly reduces the incentive to obtain employment.

22 – thanks for taking the time to set out your objections to it. Black marketing and stigma do seem to be the main stumbling blocks then? (“food stamp” vs. “magic card”, I don’t really care about the technical details of the system, but your point about intrusive bureaucracy is also well-taken).

Back to the drawing board it is!

Actually the proposals are not that different from the odious James Purnell’s under New Labour.

It’s the unspeakable in pursuit of the unemployable.

I was more or less unemployable and on benefits in the early ’80s (I was one of those shoved off the then unemployment benefit to the then Invalidity Benefit in order to rig the unemployment figures). I may have looked young & fit, but I was just off a bad drug problem and in no fit state to work, and I reckon there are a lot more replicants of me then around now.

What the neo-liberals don’t appear to realise is that these problems with the unemployed & welfare are all part of their package; you increase inequality, make the rich richer and the poor poorer, what do you expect?

“another opportunity to hand over shedloads of public cash to tory business chums?”

Yup, there’s money in them thar benefit offices. Expect to see more examples of the loathsome Emma Harrison who with her godawful A4e company has been made a millionaire off the backs of benefit claimants (and, suprise! the DWP found A4e engaged in fraud in some cases).

As for food stamps. Yes! They use them in the USA and there is no drug or alcohol problem amongst the poor there is there??!!

Oh.

BTW off topic.

A month ago the Tories and Lib-Dems were attacking Gordon Brown for using Goldman Sachs (who get lots of government dough – no questions asked) on goverment projects and asking would they be suspended until the allegations against them were properly looked into.

What is the Con-Dem position on GS now? Will they suspend them from government work??

http://www.businessweek.com/news/2010-04-20/brown-urged-by-clegg-conservatives-to-suspend-goldman-in-u-k-.html

Hi Nick,

What do you spend your money on? I’d like as full a list as possible by the end of the day please. Make sure you don’t miss out that much-needed Friday night pint, the odd CD or DVD you buy to cheer yourself up, or anything of the food variety that could be construed as a “treat”.

Seeing as how, as a benefit claimant you think my personal finances are your business, I’d like to turn that round on you. Not nice, is it?

I’m also intrigued to know how they managed to magic a vacant council house out of thin air for your cousin.

Incidentally, the Big Government/Private Provider partnerships of New Labour and the Conservative/Liberal Democrat alliance alike make a mockery of attempts by either side to characature their opponents as socialist headbangers or free market fundamentalists.

Corporatism – the bastard child of red beurocracy and capitalist greed – is the only game in town.

The fact is that we can achieve some wider social good without undermining dignity or the incentive to work.

Take food stamps or more accurately the old fashioned idea of poor families getting free school meals. If every family got free school meals that could improve health of children, help the poor without stigma, and remove a dissincentive to work.

Think along similar lines for child benefits, and even on a big scale, the NHS, and actually you realise we can do universality well. It works. And we should not be afraid of it. Apply that to things like milk vouchers and even free fruit – and maybe there are ways to support the working people of this country, along with those without work – without in turn making employment unnatractive to some.

Increasing the minimum wage would be far and away the best thing that could be done to reduce in-work poverty. But opposition to doing so doesn’t come exclusively from the private sector.

The state employs an awful lot of people on the minimum wage and many more – especially in London and the South East – on wages below a living wage.

Anyway, thinking of an increase in wages solely as a cost to employers may miss the point; if people earn below the living wage they have no disposable income at all – which means that they are not buying the products and services employers make. I wonder whether boosting incomes at the bottom might not actually have a positive effect on the economy rather than the negative one that the CBI always suggests it would.

George V

I’ve said before, the biggest test of what the Lib Dems are worth in coalition with the tories – if whether the NMW goes up in the next five years.

A few key announcements on policy and playing with the electoral system (before doing nothing with it that is worth doing) is nice and headline grabing and may keep their MPs in nice ministerial positions with attached pay and benefits.

But real influence will be the seemingly small stuff that would innevitably go only one way if the tories were in charge alone, but which they might not block on principle otherwise, year after year. Who will be appointed to the low pay commission?

31 Good point about the government wages. I suppose the CBI is looking after the interests of its members – who would rather salvage their profits than look at the bigger picture of how society could benefit from higher wages.

@28 Sarah – the intrusiveness of such a scheme is indeed a major problem, i’ll agree. As I said, the bad seems to outweigh the good.

As for council houses – if you’re pregnant and live in a 2-bedroom council house with your mother, her partner, and your two siblings, you get right to the top of the list. Hence why she did it.

Of course, this is Doncaster. There’s plenty of council housing (even if the council has knocked down loads in the recent years).

Sorry, make that three-bedroom. Silly me.

Are yes, IDS, the man to get people off ……living off the state.

This would be the same IDS who’s father was in the navy and therefore lived off the state. Or IDS who was educated at a naval school (paid for by the state) and then joined the military (paid for by the state) before joining a private arms company who sold arms to the govt (paid for by the state) and then became a politician (paid for by the state) and when he retires will have a whole range of state pensions. (paid for by the state.)

If anyone knows about living of the state he does.

Welfare reform is a bit of graveyard for political careers isn’t it? It affects so many people, many of the most vulnerable in society. The sums of money involved are eye watering…

Labour had 13 years. Some of what they did was pretty good. Minimum wage and the pro active labour market stuff to help people get back into work. Some of it was well intentioned even if the delivery was weak – Tax credits being the best example of that.

So I’ll give IDS a cautious welcome, he says he wants to make work pay. If he can achieve that, who’ll care what his special advisor prays about…

As someone who has been on benefits long-term, I’d like to make a contribution to this debate. I used to work for the DWP – by the way, everyone at my grade needed tax credits to su rvive as the pay was so low: under £15,000 a year for a 38 hour week – but lost my job because of ill-health. over 2 years on since I lost my job, I am still unable to work, partly because there just isn’t the help available for me to get better, and I know of many people in the same situation.
I have long-term depression, and while the anti-depressants have mainly stopped me from being suicidal, it has taken all this time for me to get treatment (for which I have to pay) to help me find out the underlying reasons for the depression.
Being on benefits saps your self-esteem, but so does being depressed. How can I possibly convince an employer that I am worth employing when I don’t believe it myself? Few employers would choose to employ someone with long-term mental health problems anyway.
Forcing me into work which I am unable to cope with would simply lead to me becoming ill again, possibly suicidal. I am trying to help myself and give something back to the community by doing a few hours of voluntary work a week, but I can’t always manage that. I am desperately afraid that I am an easy target, that I will be forced back into that dark place again, but this time, I may never come out.

@10 Bla Bla
The tonne of evidence is a straight as a seven pound note. When New Labour introduced the minimum wage legislation it included a ban on employers dismissing anyone whose wages were raised to NMW from a lower level. They then announced that no jobs had been lost. Brilliant!
Except of course for all those out of work because their employer went out of business because the value-added by those now on NMW was less than they cost in wages plus national insurance plus share of overheads (supervisor’s pay etc). Look at employment in the clothing & textile industry since introduction of NMW – up to 1997 employment had been declining very slowly by around 2% each year (but less, 0.6%, in 1997); in 1998 which spanned the introduction employment fell by 4.5%, in 1999 by 11.8%, in 2000 by 6.1%, in 2001 by 9.3% and since then it has halved (I can’t provide annual change data because the government stopped publishing them – I wonder why!).
As anyone capable of rational thought will realise, a firm which continuously pays people more than they earn will go bust unless it massively underpays other workers – and if it does that its best workers will leave as soon as they can get a different job that pays a fair wage. So employment in the UK clothing & textile industry has fallen by 65% since NMW was introduced. I do not think it has helped the 200,000 who have lost their jobs as a result.

@ 39 John77

I wouldnt dispute that manufacturing has declined in this country and many jobs have gone abroad because downward pressures on businesses. I dont think the answer is to make people pay for it by pushing wages lower and lower. How do you suggest these people live on such low wages? Where should it stop?

@ 40 Bla Bla
“Where should it stop?”
In a free market stops when an employer can make money by employing people at a wage they will accept. So if you’re worth £10 an hour to him he’ll pay you up to £7.65 an hour which leaves him 1p after allowing for paid holidays (4 weeks plus 8 Bank Holidays) sick leave and Employer’s National Insurance. If you’re worth £6 or £7 an hour per hour worked to him he won’t hire you because it costs him more than you are worth.
Any woman whose husband is working is a lot better off if she is earning £120 a week than if she is unemployed and getting contributions-based JSA. The amount of working tax credit depends upon her husband’s earnings but could be more than £150 a week.
Any student working in the vacations for £100 a week is better off than one taking an unpaid internship.
I said woman because much of New Labour’s propaganda was about Asian women “exploited” by working £3 or £4 an hour in Leicester and for a number of reasons, some discriminatory and others economically sound, women’s average pay was lower than men’s (even after adjusting for the vastly different working hours that Ms Harman blithely ignores to produce dramatically misleading comparisons). The minimum wage impacts disproportionately on women’s pay and employment. A man could not support a family on £3/hour for a 48-hour week so men did not take such jobs unless desperate but if it provided a second income and hours could be arranged to fit in with sending the kids off to school or to grandma, then it was worth having. Most jobs below NMW paid more than £3/hour, I am using an extreme case so that no-one says “what about those earning less than £4/hour.
Students now earn LESS for vacation work than they did before introduction of NMW because the decent vac jobs that provide useful training are now unpaid because NMW on top of the cost of staff time training the student is more than the value of work done, whereas previously they could pay good pocket money for a youngster filling in during staff summer holidays.
“I don’t think the answer is to make people pay for it by pushing wages lower and lower.” is well-meaning but does not exhibit rational thought. The absence of NMW was not pushing wages lower – real wages were rising in 1997: what NMW did was to push costs higher than value in a majority of cases (not all). The people who are paying for it are those now unemployed, not those in work.
Your “downward pressures on businesses” seems to absolve New Labour’s economic policy from blame for a disastrous collapse in UK manufacturing which is far worse than in comparable countries. Between June 1997 and September 2009 manufacturing employment in the UK fell 37%! Women’s employment in manufacturing fell 48%!! And that excludes the massive job losses since September. A large majority of women in manufacturing industry in 1997 were earning more than NMW – so a lot of that 48% have lost jobs with good wages in order to achieve a propaganda success at the expense of the jobs that were low-paid because they were low-added-value.
We currently have well over 5.5 million unemployed (there are that many claiming unemployment-related benefits excluding those excluded by being classified as “early retirement” or scraping a living a few hours a week as “self-employed”).

@ 41 John77
First of all I have never said I was a Labour supporter – my arguments are not about Labour – they are about the immorality of paying someone a wage below which they can reasonably live on (I do not even agree that people can live on the minimum wage anyway – which is why I support a living wage). I also did not say anything which implies I am absolving Labour for their responsibilty for eroding manufacturing – I completely agree with you on that – I just dont believe its due to the introduction of the minimum wage.
My argument is that people should not be expected to work for wages they are unable to live on. If we live in a country where employers are not made to pay people decent wages then we have to have a situation where people are guaranteed a minimum income and this means through the benefits system – hardly an ideal situation (the government picking up the tab for employers not contributing to society). If I was unemployed and the only job available to me were really low paid work which I could not live on I would probably choose to live on benefits – which would cover my rent etc through housing benefits. fortunately I have never been in that situation yet but I am well aware this could happen, being fully aware of the insecurities people in the low wage sector face – which is why I support the notion of protected wage for all. You talk about wages and jobs as if it is an exact science – it is not – employers throughout history have paid people what they can get away with. In third world countries – where there are no wage protections people are paid peanuts. Ofcourse, that will not happen here aslong as people can apply for benefits – pay will always reflect this and be slightly more than benefits. but as benefits get lower and lower and people are forced off them – the market for jobs paying people low wages and offering less and less job security grows. Just look to the US for how this pattern has panned out.

You also seem to suggest that it is fine to have low paid jobs because this provides employment for young people and wives – can you be certain that if the minimum wage was removed it would only affect these groups? What about single parents who have to survive fully on these wages?

@ 41 John77

First of all I have never said I was a Labour supporter – my arguments are not about Labour – they are about the immorality of paying someone a wage below which they can reasonably live on (I do not even agree that people can live on the minimum wage anyway – which is why I support a living wage). I also did not say anything which implies I am absolving Labour for their responsibilty for eroding manufacturing – I completely agree with you on that.
My argument is that people should not be expected to work for wages they are unable to live on. If we live in a country where employers are not made to pay people decent wages then we have to have a situation where people are guaranteed a minimum income and this means through the benefits system – hardly an ideal situation (the government picking up the tab for employers not contributing to society). If I was unemployed and the only job available to me were really low paid work which I could not live on I would probably choose to live on benefits – which would cover my rent etc through housing benefits. fortunately I have never been in that situation yet but I am well aware this could happen, being fully aware of the insecurities people in the low wage sector face – which is why I support the notion of protected wage for all. You talk about wages and jobs as if it is an exact science – it is not – employers throughout history have paid people what they can get away with. In third world countries – where there are no wage protections people are paid peanuts. Ofcourse, that will not happen here aslong as people can apply for benefits – pay will always reflect this and be slightly more than benefits. but as benefits get lower and lower and people are forced off them – then so will wages.
You also seem to suggest that it is fine to have low paid jobs because this provides employment for young people and wives – if there was no minimum wage, under JSA rules – people are going to be forced to take a reasonable job offer (as yet undefined) – this means anyone who is unemployed, whether they are students, wives, or single parents, will be forced to take jobs, and without a minimum wage, this could be extremely low paid.

There are several bizarre features about the governmenttalk on unemployment. Firstly, the tax-cutters want to rid public services of useless pen-pushers. Then these pen-pushers undergo a mystical process where they become The Unemployed, who are apparently all illiterate and have no internet access at home.

I have had a patchy work record due to being trapped in referece-and-respect-free office temping. I have seen the sort of ‘help’ given to The Unemployed, which consisted of a string of literacy tests, ‘CV help’, condescending lectures on Positive Attitude and more literacy tests. It also involved sitting in a smelly, dark little room waiting for one of the three computers, two local newspapers and single phone line to be free while these resources sat unused in my flat.

The government could save a lot of money by having some faith in white-collar jobseekers and allowing them time to look for elusive jobs. These people are generally willing to pay for their own internet and phone access while doing so!
It would clear space on these courses for the genuinely illiterate and unemployable to have more opportunities – once the courses had been funded and properly checked.

There is also continual pressure on office-type workers to do semi-skilled jobs for minimum wage, which removes the incentive for people to work hard or take any training. These jobs never offer any ladder system or hope of a pay raise, and yet the firms who offer such terrible wages expect an increasingly demanding range of skills for the same bargain price. Since there is no sense of collective loyalty or unionisation among temps, there will always be some fool or part-time dallyer willing to write a firm’s website for £6 an hour.

@42 Bla Bla
I never said you were a Labour supporter either. I thought you had had the wool pulled over your eyes by Brown and his supporters claiming that all our economic problems are due to globalisation and the world economic environment whereas the overwhelming bulk of our economic problems are internally created with the largest share created by the Labour government. I am relieved that you recognise this as it makes discussion easier.
I think it is immoral to pay someone much less than they earn, but what they can live on is usually out of control of the employer and in fact it is now illegal for an employer to discriminate between employees who are doing the same job by paying higher wages to one with dependents or with higher housing costs. I want everyone to have a decent standard of living but I see the way to that through increasing total national prosperity first and then, where necessary, reallocating each year some resources from those having surplus wealth/income to those who don’t have enough. Legislation that destroys otherwise viable businesses reduces total national prosperity and makes us all worse off.
You point out that “employers throughout history have paid people what they can get away with” – generally, albeit only partially, true: Rolls-Royce traditionally pays higher wages in order to attract the best workers and many others used to do. My point is that employers CANNOT get away with paying people more than they earn. Setting a NMW destroys jobs whose added value is less than labour costs when NMW is applied.
You talk about people being forced to take jobs Firstly no-one is forced to take a job although they may have pressure put upon them; secondly, and more importantly, you are assuming that there is a job to take. The more jobs there are the more choice that workers and would-be workers will have. The imposition of a NMW has destroyed a lot of jobs that paid above that level.
When there are more jobs than workers, wages tend to rise as employers compete for workers; when there are more workers than jobs real wages tend to fall as workers compete for jobs and last summer we had the spectacle of high-quality graduates competing for unpaid jobs. Historians will example a dramatic increase in agricultural wages after the Black Death, significant wage rises during the Napoleonic Wars and the First World War (and several other examples that I can’t remember).
I think that for some jobs the options are either low-pay or no job at all. One solution has been for some of these to be carried out by nominally self-employed individuals who are not covered by NMW legislation and are also not entitled to sick pay, the benefit of employers’ liability insurance if working with faulty equipment, paid holidays … I do not regard this as an improvement. The ONS reports that there are more self-employed than full-time employees in the bottom decile of income distribution (household equivalised – they don’t show raw data) although there are more than five times as many full-time employees than self-employed in the whole population.
“If we live in a country where employers are not made to pay people decent wages”. I do not have a magic wand: do you? There are states that have a guaranteed minimum income including Alaska and Kuwait, but in the absence of a free lunch if we want to raise the income of the poor then someone has to pay for it and that means US. The benefit system means that someone earning £10 an hour with a wife and three kids gets more money than a single person doing the same job for the same wage. Is that the employer’s responsibility? If so, abolish all equal pay legislation, bring back the company town and tilt the economic playing field so far in the company’s direction that it can afford to pay one guy three times as much as another. I don’t think the last is a good idea, although some company towns were a major benefit to workers and their families.
And, of course, we need a reasonable definition of “reasonable”! Under the current system anyone unemployed around here would be worse off taking a job in London that paid less than £15,000 because travelling costs from home to work are ignored for income tax and tax credit. NMW is not an issue here – the issue is the local Jobcentre manager and the sort of jobsworth who tries to insist that a physically clumsy maths graduate should take a job as kitchen staff handling sharp knives as that was the only job not requiring qualifications that he had on his books cannot be made worse by abolition of NMW.

@ 45. John77
Actually yes I do believe that globalisation and the world economic climate has a lot to do with the problems we have in this country. High unemployment has existed before the Labour party came into power. I dont see the point in turning this into a debate as to who caused this issue, Labour or the Conservatives.

I think you are the one with the wool pulled over your eyes – do you mean to tell me that introducing a national minimum wage is the main cause to high unemployment?!
I cant accept that employment conditions are that exactly connected to pay – if a company needs staff to make profits it will employ them. Paying someone an extra pound an hour eats into their profits, but, for large companies at least, it will not mean they wont afford to keep going – I dont have the figures to hand but some of the UK’s largest companies made millions and millions of pounds in profits last year – profits that would have easily allowed increase in wages of workers.
As for small companies and certain sectors – yes it probably would affect them. Manufacturing for example – the reason we dont manufacture much in this country anymore is because companies can go to developing countries where there is no wage protections and staff are paid pennies for their work. Manufacturers cannot compete with that here. That is where globalisation comes in.
I totally agree with you on the self employment point – there, we agree on something!

I am not saying NMW is the sole cause of the current high rate of unemployment but it IS a significant factor. New Labour has tried to claim that unemployment was nearly as high under Thatcher by pretending the 2.5m unemployed people receiving disability benefit don’t count (they wouldn’t get disability benefit if they had a job but they don’t get JSA so they are excluded from the “claimant count”). Certainly the last-but-one government got some things wrong – most notably the exchange rate that they allowed to drift up too high – but that is not the point under discussion.
Does NMW help or hurt the poor? It clearly has hurt the poor.
The impact of globalisation would be much less without NMW. In the early ’90s Next and others imported cheap dresses from China but retained small textile companies in England to make short runs of whichever garment sold out (shipping from China takes months and despite the higher wages it was cheaper to have garments made in England than fly them from China). After 1998 this option ceased to be viable so Next et al stopped sourcing garments in the UK. This was followed by M&S abandoning their “made in UK” policy because they could not compete – there is a limit to the price premium that shoppers would pay to buy from M&S. Secondly, although I should not want to work in a Call Centre lots of people did but most of those jobs have been outsourced to India on cost grounds over the last decade. I liked K shoes which were made in Kendal where wages and living costs were both low – setting a NMW that ignored low living costs in Kendal has destroyed that company. Dyson has been forced to relocate manufacturing to the Far East (while keeping R&D here) because component prices in the UK had been pushed up to the point that their product was uncompetitive not because of the cost of their own workers who were paid well above NMW but because of other UK costs. There are hundreds of examples.
Globalisation does not kill jobs if Chinese workers get paid a few pennies less – it only has an impact on UK jobs when the difference in labour costs is enough to outbalance transport costs (which are pretty substantial), the cost of capital of building a new factory in China to produce a product identical to that produced in an already existing factory in the UK and the time value of the delay in delivery.
If you are looking at profits of the FTSE-100 you will find that most of those are earned overseas so they are irrelevant to this debate. Also very few of them have any employees on the NMW.
“I cant accept that employment conditions are that exactly connected to pay” – sorry but in the real world if hiring more staff will reduce profits they will *not* hire them so your argument means that employment levels *are* connected to pay and if a company’s payroll exceeds its turnover less cost of purchasing raw materials, fuel, rent, rates etc it goes bust and *everyone* is out of a job. Yes, there are other factors but pay is the biggest.

john 77

I think the point you are missing is that it is because wages are so low in other countries that the temptation for companies to outsource and make larger profits means that to compete, all companies must follow suit.

Workers paid a few pennies less in China? Its not a case of a few pennies – its much more than that and most companies, in some way, as part of their business, benefit from using outsourced products/human labour from the developing world, which makes production costs low and means that it is no longer competitive to pay people decent wages to produce the goods here.

FTSE 100 companies dont employ cleaners etc?! They might outsource them to other companies which will pay the workers low wages but that is because those companies are forced to charge low costs for their services so their contract is chosen.

I still dont understand how it would be better for someone to work on below minimum wage than be on benefits where their rent might be paid. I am trying to avoid making this personal but I would be interested to know if you have ever worked on minimum wage? It is not a great experience believe me.

You are also forgetting that staff create value, they dont take it away. So if a company employs someone for a certain wage, they will bring in money to the business which is above what they are paid. You talk as if the employer is doing someone a favour by employing them? If a business cannot afford a person – it is because that business is not viable. and often the business is not viable for the reasons i have mentioned above – competition from businesses outsourcing more and more of their work to developing countries.

“I think the point you are missing is that it is because wages are so low in other countries that the temptation for companies to outsource and make larger profits means that to compete, all companies must follow suit.”
No, that is an analogy of the Efficient Markets Hypothesis which is very nice and tidy and helps academics devise nice theories but is just not true in the real world. Some companies need to relocate production to lower-wage countries or outsource to remain competitive, others do not. If that was true BMW and VW and Siemens and … would have relocated plants to England to exploit the lower wages in England than in Germany! Rolls-Royce has survived while Courtaulds has virtually collapsed. Rolls-Royce is not and was not a supplier to companies with a low-wage workforce. Courtaulds was but is no more because its UK customer base has been destroyed.
The decision to relocate/outsource depends on firstly and most importantly the ability to reproduce the product in a lower-wage location with lower-wage workers (this includes the availability of skills and infrastructure); secondly, on the labour costs (which is not the same as wage-rates since both productivity and non-wage costs – pensions, health cover, holidays, payroll taxes are involved), thirdly transport costs, fourthly other non-labour input costs – raw material and component prices, power prices, rents and local taxes etc and fifthly on the cost of the capital investment (converted into pence per unit of output required to amortise the cost, including interest on borrowed money, over the life of the factory) and the extra working capital required; in some cases you subtract the sale value of the UK (or French or German or US) factory less severance costs for your existing workforce, in others you add severance costs and the outstanding lease payments on useless property.
The sums do not work out the same for each company. So some companies cannot compete if based in the UK even if they paid no wages at all while others can compete while paying high wages. Some companies relocated manufacturing to the Far East in the 1970s, 1980s and 1990s when the wage differential between Britain and China/Thailand/Malaysia was significantly greater than it is now. Others did not.
Since the introduction of NMW the decline in British manufacturing industry has been much faster and relatively concentrated in those sectors that previously paid low wages. In those low-paid service industries that cannot relocate such as cleaning and security guards the workforce has shrunk due to increased mechanisation and the introduction of electronic security systems.
“I still dont understand how it would be better for someone to work on below minimum wage than be on benefits where their rent might be paid.” Please re-read what I said earlier “A man could not support a family on £3/hour for a 48-hour week so men did not take such jobs unless desperate” Those taking low-wage jobs would not have their rent paid if they lost them – many would not even get JSA if they were only available for part-time work. An extra £60 (or £80 in current money terms) week can make a big difference. In case you hadn’t noticed “better-off on benefits” does not apply only to those on the minimum wage – it includes some people commuting into London to earn £300 a week.
You want to ask if I know what I’m talking about – well, yes. I have studied some economics and passed a few exams in it but more importantly I have also studied businesses and have been looking at the effects of economics on people for well over twenty years. My first job paid £6 a week. I have never been employed on the NMW but there have been two years when my income from self-employment was less than if I had worked the same hours (or even just a 40-hour week) on NMW.
Your last paragraph seems a bit confused “So if a company employs someone for a certain wage, they will bring in money to the business which is above what they are paid.” No, it is NOT automatic. The business does not hire someone at random who immediately generates cash by smiling. It is the other way round. The business will only hire someone if they expect that hiring to increase revenue more than costs. “If a business cannot afford a person – it is because that business is not viable.” That sounds like a call for BP and Shell to hire everyone in the country! If the business is not viable it will close, but if it is viable with seven workers and makes profits of £200 per week which comprises the boss’s income in lieu of wages that does not mean it can take on an eighth – only if the eighth helps the business generate extra revenue can the business afford him/her.
Of course it would be nice if everyone earned high wages and there were no unemployed people but expecting some vague “employers” to conjure wealth out of the air so that they can pay £6 or £10 per hour to people who add value at the rate of £3 per hour is cloud cuckoo land.
It was predicted on the basis of elementary economics that the introduction of NMW would result in increased unemployment. It is abundantly clear that it has done so. It is a (minor) reason why the poor got poorer under New Labour while the rich got richer in sharp contrast to Old Labour where the poor got richer while the rich got poorer and the Tories where both rich and poor got richer. Compare UK economic growth before and since 1998 with that of the other major European economies that faced exactly the same world economic environment – you cannot blame globalisation and the world economic climate for the big deterioration in our *relative* performance.

John 77

You keep giving lots of examples – do you have any statistics on how many employers have been affected by globalisation and those who have not? We could both sit here and find examples to bash back and forth.

“Since the introduction of NMW the decline in British manufacturing industry has been much faster and relatively concentrated in those sectors that previously paid low wages. In those low-paid service industries that cannot relocate such as cleaning and security guards the workforce has shrunk due to increased mechanisation and the introduction of electronic security systems.”

are you suggesting that if employers could pay people a pound or two less then they wouldnt have done this? Are companies not always on the lookout for the most profit possible? Should they be allowed to do this, at the cost of people’s lives?

“The sums do not work out the same for each company. So some companies cannot compete if based in the UK even if they paid no wages at all while others can compete while paying high wages. Some companies relocated manufacturing to the Far East in the 1970s, 1980s and 1990s when the wage differential between Britain and China/Thailand/Malaysia was significantly greater than it is now. Others did not.”

Surely you are not suggesting that in some cases wage costs affect a companies decision and in some cases they do not? I thought you were saying that minimum wage was the largest contributory factor?

“I still dont understand how it would be better for someone to work on below minimum wage than be on benefits where their rent might be paid.” Please re-read what I said earlier “A man could not support a family on £3/hour for a 48-hour week so men did not take such jobs unless desperate” Those taking low-wage jobs would not have their rent paid if they lost them – many would not even get JSA if they were only available for part-time work. An extra £60 (or £80 in current money terms) week can make a big difference. In case you hadn’t noticed “better-off on benefits” does not apply only to those on the minimum wage – it includes some people commuting into London to earn £300 a week.”

I am sorry but I dont understand the above comment. It still doesnt answer the question of why it is better for people to work for less than minimum wage, rather than not work at all. I still stand by that without legal rights we cannot ensure that employers will not exploit people – as employment rights increase, the experience of the workers improves in all ways – you only need to look to the US whose levels of employment rights are vastly lower than ours and compare it to the poverty levels that exist in that great, wealthy country. I can imagine, that at first, rates would be prevented from sinking too low because people will realise they are better off on benefits. But as benefit claimants grow in number, the government, seeing an easy target to reduce their overheads, will target these ‘benefit cheats’ and force them to take these jobs. In the US where most states offer barely and unemployments at all, and if they do they make it extremely difficult to claim them, people are forced into extremely low, insecure work, without any other safety net to act as a bargaining tool.

I would not absolve Labour from all responsibility of this crisis but accrediting them with all of the blame for unemployment in the middle of a global recession is ridiculous.

I would also be interested to know your thoughts on the fact that the government has to make up for in tax credits when employers do not pay people enough – this increases government spending – is this not also bad for our economy?

“Of course it would be nice if everyone earned high wages and there were no unemployed people but expecting some vague “employers” to conjure wealth out of the air so that they can pay £6 or £10 per hour to people who add value at the rate of £3 per hour is cloud cuckoo land.

What about companies who pay top wages, not to mention, bonuses, at the other end of the scale, to keep the ‘most talented’ in their company?

If you won’t listen we can waste not just all day but all month.
“I am not saying NMW is the sole cause of the current high rate of unemployment but it IS a significant factor.” to which you reply “I thought you were saying that minimum wage was the largest contributory factor?”
I said that wages are not a deciding factor in some cases because the ability to produce the goods critical and if the Chinese or Thais cannot produce them the wage rates in China do not matter.
A household with one person earning X and a second earning Y is better off than if the first is earning X and the second is earning nothing. If you cannot understand this, then I give up.

@ 51 “A household with one person earning X and a second earning Y is better off than if the first is earning X and the second is earning nothing. If you cannot understand this, then I give up.”

Only because of the way our tax/benefits system is skewed against single earner households. If you are unemployed or on low wages it’s actually better to have both people earning nothing than one earning Y and one earning nothing.

@51
Not agreeing with someone is not the same as not listening to someone. I dont agree that anyone should live on less than minimum wage – and I believe that once you take away that legal right then employers can get away with what they like. I dont believe you have provided enough evidence to show me this wont be the case. It is not worth continuing this debate as we will never agree on this point.

@52
Regrettably true but not what I was discussing – may I refer you to 41 where I said
“The minimum wage impacts disproportionately on women’s pay and employment. A man could not support a family on £3/hour for a 48-hour week so men did not take such jobs unless desperate but if it provided a second income and hours could be arranged to fit in with sending the kids off to school or to grandma, then it was worth having.” ?
The bias against single-earner households is a major fault in the system but only one of many.
@51 I understand the sentiment. I am not advocating a reduction in household income: I am complaining about it. However I think that many of the 1 million-plus who are working part-time because they cannot find a full-time job would prefer to earn £200 or even £160 for a 40-hour week than £115 for a twenty-hour week and many of the 2 million who are victims of the increase in unemployment since 1998 would prefer to have paying jobs.