When Labour members last year backed a £15 an hour minimum wage at their annual conference, Sir Keir Starmer ignored the vote. This year the Labour leader won’t be able to easily shrug off the policy. Real pay is falling faster than ever. Inflation could reach 18% next year – the highest since 1976. Against this backdrop, the Trades Union Congress is calling for a £15 minimum wage, up from £9.50. This appears a big step, but it ought not to surprise anyone. Britain is seeing a series of strikes being announced as workers seek pay rises in the face of the cost of living crisis. Alan Jones, the industrial correspondent of PA Media, thinks Britain is as close now to a general strike as it has ever been.
With high inflation eating into most people’s incomes and only the top 1% seeing salaries keep up with prices, conflict over wages is all but inevitable. The TUC plan rests on raising the minimum wage from two-thirds of median hourly pay to three-quarters. It calls for a demand-led approach to the economy. Crucially, the TUC says Britain needs a collective bargaining structure that not only sets a minimum but some average rates of sector pay. In Europe, such schemes have seen more income equality and higher pay growth. If wages grew as fast as they did under the last Labour government, the TUC says, the minimum wage would hit £15 an hour in 2030. Sir Keir ought to be as ambitious as the last Labour administration.
But the end of the decade is a long time to wait. If Sir Keir wanted to be more radical he could adopt the Progressive Economy Forum’s (PEF) proposal for a £15 minimum wage by 2025. Inflation is a question of the distribution of society’s income – with the poorest hit hardest while some firms rake in monopoly profits. Yet wage restraint, not profit moderation, is seen as inflation-proofing. A £15 an hour minimum wage in 2025 would correct for low-paid employees’ losses in the last 10 years. It would also be a levelling up measure: a third of London’s employees would benefit, but so would half of workers in the north of England. Higher wages would also reverse the shrinkage in the slice of economic pie that workers receive.
There are implications for smaller companies that are already suffering from higher costs – and would take a hit from bigger pay packets. However, PEF says that raising the minimum wage would see the government collect more taxes and make benefit savings. It suggests the Treasury would be able to reduce national insurance by 3p to compensate small businesses for increased costs. So far, Sir Keir’s policy offer falls short of such detailed thinking, or even what the TUC is calling for. But anger is simmering away. One union-supported grassroots campaign signed up 400,000 people in a matter of days. Liz Truss, the frontrunner to be the next prime minister, looks to be spoiling for a fight with the unions. Sir Keir won’t stand on a picket line to show solidarity. But Labour should express its affinity with working people in clear policy terms, by backing a higher minimum wage.