A political arms race threatens to undermine a policy triumphby Johnny Runge / December 4, 2019 / Leave a comment
The UK minimum wage has been a great success story since its introduction in 1999. Twenty years on, it is at risk of becoming overly politicised in a growing arms race between the two main parties, both eager to claim the credit for boosting the earnings of millions of low-paid workers across Britain.
In reality, the policy success owes a lot to its institutional setup, in which politicians delegated the responsibility to a social partnership of experts, who came together and formulated minimum wage policy based on careful, evidence-based economic research rather than an ideology-driven agenda.
However, political parties now seem to have forgotten the lessons of the past, and gone into a political bidding war of who can offer the highest minimum wage. Currently at £8.21 an hour, Labour has pledged a £10 minimum wage by next year and the Conservatives plan to increase the level to £10.50 by 2024. Both proposals would take the UK into uncharted waters and place our minimum wage as one of the highest among similar countries.
If the parties decide to plough through and aim for short-term electoral gains, this would further politicise the UK minimum wage and risk undermining its strong institutional foundation. Most importantly, a dogmatic approach risks setting the level too high, which could severely damage the employment prospects of millions of hard-working people.
Of course, setting the level of the minimum wage is ultimately a political decision taken by the government of the day, just as it was a political decision when the Labour government introduced it in 1999. At the time, it was opposed by the Conservative Party and there were even diverging views within the labour movement, as it represented a significant departure from collective bargaining for low-paid workers.
Two decades later, one of the greatest successes of UK minimum wage policy has been the remarkable consensus across all actors in the British economy, including political parties. The policymaking was institutionalised through the establishment of an independent body known as the Low Pay Commission (LPC), comprising an equal number of representatives of employers, workers and academic experts. They were tasked with guiding the path of the minimum wage, and making recommendations to the government on annual increases.
Every year, the LPC analyses…