Ed Miliband and the Archbishop of York have been very much in the news recently, waxing lyrical on the subject of the minimum (as opposed to the living) wage.
There are, of course, headlines to be achieved with such comments, for anything that will strike a chord with a substantial percentage of the population is bound to get support. However, as with most stories, not all the information is laid before the general public.
Take the minimum wage. This is a floor level which all employers must pay, but it does not mean that it is the going rate. Many manufacturers, for instance, use this as the base for compiling piecework rates, such that the more that is accomplished in a given time, the more the employee earns. It also takes no account of any bonus scheme that is on offer.
More importantly, what the archbishop and politicians forget to mention, is the fact that on top of the minimum rate, all employers will have to contribute to their workers’ pension by way of the new auto-enrolment scheme, due for full implementation next year.
Initially a 0.8 per cent employee contribution, matched by a one per cent employer payment, will rise over the next four years, to a level of four per cent employee, three per cent employer, plus tax relief, which will go into each pension pot. On minimum rates, this will equate to 0.50 pence per hour based on today’s £6.31.
This fact is not being reflected by politicians or the church when condemning the current minimum rates as not being a living wage. Nor do they comment on the fact that employees, by increasing their skills and abilities, can open the door to much better rates of pay and quality of jobs.
What critics also fail to highlight is what all employers have to face, namely differentials, the subject of many long and bitter strikes in yesteryear, especially in the motor trade. People, who have learnt greater skills in their own time, understandably insist on there being a gulf between their rates, and those who have not bothered. This causes businesses to become uncompetitive quickly unless costs are controlled, leading inevitably to unemployment.
The difference between a minimum and living wage can cause great passion, but it is better to be employed with prospects, than on the dole with none.
* Russell Luckock is chairman of pressings firm AE Harris