Derby City Lib Dem calls for an increase in the minimum wage

January 30, 2015 9:50 AM

Cllr Joe Naitta of Derby City Liberal Democrats has issued a heartfelt plea for an increase in the minimum wage, submitting a motion in Council on 28th January to demand the Low Pay Commission increase the minimum wage to £9.00 per hour, which 'would increase spending, collect more taxes and reduce the benefits bill'.

Cllr Naitta says: 'The only way to transform the economy is to put up the minimum wage', reminding us that the minimum wage was 'a key Labour pledge in the 1997 election campaign', set then at £3.60 per hour for those aged over 22. The minimum wage is now £6.50 an hour for those aged 21 and over.

Reviewed yearly in October, the latest increase was the first real-terms rise since 2008.

The minimum wage is earned by a million adults, a significant number of people, with 2 million more earning barely above this level. The potential for growth in economic spending from increased earnings among the lower paid is tremendous, especially as the lower paid spend a greater proportion of their incomes compared to high earners.

As Cllr Naitta reminds us, 'the UK minimum wage is lower than those in Germany and France, while some argue it is insufficient to live on'.

Deep rooted problems

Whatever is promised, any incoming government and Chancellor of the Exchequer will need to make spending cuts, given the size of the UKs deficit, although Cllr Joe Naitta has a recipe for dealing with this - he points out that 'We could cut public expenditure significantly if our economy were as productive as that of America or Germany. Every year, billions of pounds of taxpayers' money are paid out to people in work. This is quite right, for the simple reason that these workers do not earn enough to enjoy a reasonable standard of living'.

Simply put, paying the lower paid more by raising the minimum wage would cut the benefits bill: the sums of money in benefits are not small. In the last financial year housing benefits cost £4.4 billion, council benefits amounted to £564 million, statutory maternity pay was 2.3 billion and statutory sick pay £50 million. Treasury figures show combined child and working tax credits cost almost £21 billion.

These figures are huge.

Cllr Naitta says 'I believe that we should raise the minimum wage and I further believe that doing so will not only reduce the benefits bill to the tax payer and put money in the pockets of working people, but it could also transform our economy'.

However, something else is also needed: as Cllr Naitta points out, 'This country is 20% less productive then America and Germany. What that means is that if all of the citizens of the three countries start work on a Monday morning, the Americans and the Germans can stop work on Thursday evening, but we have to go on working through Friday just to produce as much as they have done by the night before. In total that gap is measured in billions of pounds each year'.

Addressing wages and productivity could vastly benefit our public finances.

'It is certain however that any calls for raising the minimum wage will be met with the same claims of doom and gloom, lost jobs and bankrupt companies that met its introduction in the 1990s', says Cllr Joe Naitta, 'yet we now have more people at work than ever before in the history of these islands. What is more, the highest rate of jobs growth has been in small companies- the very ones said to have been most at risk from a minimum wage'.

The argument for the taxpayer is simple. The more generous the rise in the minimum wage, the less public money has to be spent in benefits to the low paid. There is no doubt that a significant hike in minimum wage would have its effect throughout the rest of the wage economy. There are also benefits here in terms of increased taxes. The low level of income tax collected in the last year was one of the problems the Chancellor faced in his Autumn Statement.

Cllr Naitta reminds us that 'The very jobs opponents will claim are at risk, such as night workers replenishing supermarket shelves, are essential to today's lifestyles, and so unlikely to be at risk'. It is also unlikely, he adds, that 'they will pass costs to consumers, given the fierce competition in the grocery sector' (indeed, shelf stackers already earn above the minimum wage in at least some stores). It is also the case that serial discounts and offers have a bigger impact on grocery business costs than wages.

Finally, Cllr Naitta adds that higher wages will encourage employers to invest in raising productivity and in training. This, he argues, means 'far more opportunities for job creation in a more productive economy. Rather than making up for our poor productivity by paying low wages and then handing out benefits to make up the difference, employers will address the fundamental question of why we are less productive than our peers'.