Low pay and the minimum wage at Conservative Party Conference 2013

Low pay and the minimum wage have been one of the key themes of this year’s party conference season. Because of the running order, the Lib Dems and Labour have already had the chance to set out their stalls. Vince Cable has asked the Low Pay Commission to look at how a higher national minimum wage could be achieved without damaging employment. Ed Miliband is concerned about the minimum wage’s falling real-terms value and has indicated his support for a sectoral element to setting the minimum wage. Bright Blue has now joined others in Conservative ranks by calling on the Tories to match, or even raise, these opening stakes.

Why isn’t it mad to say that the Tories might well act on this advice? First, it’s too easy to think that today’s policy positions have always been that way. Cameron and Osborne have of course already repositioned the Conservative party in support of the principle of the minimum wage. Changes happen on the left too: it was John Prescott who once said “any fool knows that a minimum wage would cause a shake-out in jobs” before the idea became Labour Party policy. And as James Plunkett has noted, a fuller Tory reversal to raise or strengthen the minimum is less surprising when you consider the strong Tory heritage of fighting for the low paid.

Second, there’s the politics. Five million people earning below the Living Wage are a lot to ignore. Meanwhile, just 4 per cent of those recently polled felt the Conservatives had especially good ideas to help raise the pay of low-wage workers without damaging the overall economy. Labour were on 14 per cent, hardly something to be proud of but nonetheless a dominant lead. And on the policy itself, the minimum wage is unusually popular. Public polling in 2010 showed that 41 per cent of people thought the minimum wage was set at about the right level while 48 per cent felt it was too low. Just 4 per cent thought it was too high. Since then it has lost value in real terms.

Third, while you might say this simply shows the Tories must help low paid people through other means, the list of ways to do this is short. Take the first instinct of the party: cutting the burden of tax. This won’t work as well in 2015 as it has in the past. That’s because, by increasing the personal income tax allowance, the current government has lifted millions of low paid workers out of tax. By 2015, the UK’s five million lowest paid people will earn too little to pay any income tax. Whether it’s done by cutting the basic rate, raising the personal allowance further or even reintroducing the 10p tax rate, not a penny of any 2015 pledge to cut income tax will go to Britain’s five million lowest paid workers.

Fourth, would Cameron and Osborne really be able to get a stronger minimum wage through the party itself? As Bright Blue’s support suggests, there’s a growing segment of the party which wants a strong minimum wage. They are building on arguments from influential MPs like Matt Hancock and Rob Halfon, and groups such as Renewal. This increasing support for a higher minimum wage from the right is encouraged by the current situation in which the taxpayer subsidises low-paying employers through tax credits, which should stick in the craw of any Conservative. A stronger minimum wage raises work incentives and reduces the benefits bill.

So while action on the minimum wage at the Conservative conference may not be likely, it’s certainly possible. And there is scope for change. The national minimum wage can be an ill-fitting garment, capable of being simultaneously too high and too low, across different regions and sectors. The Resolution Foundation is currently exploring the available options on the minimum wage. It’s already clear that there’s an appetite to reinforce the low pay element of the Low Pay Commission’s role. And there are compromises which could run alongside this to protect firms. NICs holidays, as done through the Employment Allowance announced at the last budget could be of real value to SMEs. A pledge to strengthen the minimum wage could play a key role in a Tory plan to support the low paid.

This post orginally appeared on Bright Blue