A Scottish Minimum Wage

poverty-ethnicity420x250By Dan Paris

When Labour released their proposals for further devolution in March, they pitched it as giving the Scottish Parliament ‘Powers For A Purpose’. Rather than devolving power for the sake of devolving power, the argument went, Labour would look to give the Scottish Parliament the powers to pursue social change.

In practice, Labour’s proposals lacked the scope and ambition that many will seek from the next stage of the devolution settlement. Part of the problem was an unwillingness to separate Labour’s policy objectives from a discussion on devolved powers – leading to the ludicrous proposal that a Scottish Parliament should be able to increase tax for high earners but never decrease it, regardless of the wishes of the elected Government.

But ‘powers for a purpose’ is a fitting starting point. The great achievements of devolution so far have been the protection of public services from privatisation and the extension of universalism in education and health. With the limited scope of devolved powers as they stand, the Scottish Government has often felt like a gatekeeper against the worst excesses of UK Government policy. A new devolved settlement has the potential to change that.

Alex Salmond set out three tests as to whether the next settlement would be judged a success: economic powers to create prosperity and jobs; the power to tackle inequality; and giving Scotland a stronger voice on the international stage. Nicola Sturgeon has said that we should seek a settlement that will “allow us to create jobs, ensure proper fiscal accountability, protect our public services, deliver fair social security and tackle the inequality that scars our nation”.

One of the key powers that could deliver both on tackling inequality and in creating jobs would be the devolution of the National Minimum Wage.

A key part of the SNP’s proposals for independence was to guarantee that the minimum-wage would rise, at the very least, in line with inflation. The Scottish Government’s working group on welfare proposed a series of above inflation rises in order for the minimum-wage to reach the level of the Scottish Living Wage, currently paid to public sector workers in Scotland.

One of the key drivers of poverty in modern Scotland has been the failure of wages to rise in line with the cost of living. This is a phenomenon that stretches far further back than the financial crash of 2008, and one that we can’t expect to address itself naturally through the market. A universal Living Wage would end in-work poverty for full-time workers and begin to make a dent on levels of inequality over all.

Working poverty is not just a moral outrage – although it certainly is that – but destructive economic policy. There is overwhelming evidence that inequality on the scale currently experienced in Scotland is bad for overall economic growth. A worker on the minimum-wage has little spending power, little ability to save or to financially plan for the long-term, and may be one of many who are forced to turn to the vicious cycle of payday loans in order to pay their bills.

A National Living Wage would be a massive fiscal stimulus into every town centre and working-class community in Scotland. The two tests of creating prosperity and tackling inequality are inextricably linked together. A Scottish minimum-wage is one place to start.



Categories: Austerity Britain

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10 replies

  1. Here’s a link to a study carried out on the effects of increasing the national minimum wage

    http://cep.lse.ac.uk/research/labour/minimumwage/WP1481c.pdf

    It looks at the impacts on wage and employment and is an interesting read.

    However, there are some external issues to consider that should also be analysed at the same time.

    What to do about the self-employed

    How to treat rent

    How to treat inflation

    Do you cut taxes and raise the minimum tax threshold

    Do you fix national insurance so that it is an insurance and raise the minimum threshold to the same as the income tax threshold to £10,500. As the low paid pay more in national insurance contributions than they do with income tax and this starts at around £6,000

    What do you do with VAT

    What do you do with the new universal credit as it takes away a lot of the benefits produced by some of the measures above.

    What do you do about tax credits and housing benefit. When you increase the minimum wage a lot of employers cut a deal with their employees. They agree to say that they are being paid less and work less hours than they actually do. This means the employee gets more tax credits and benefits than they normally would. Which means everyone else has to pay more tax to fill that gap. Employers when they face an increase in the minimum wage have to reduce costs somehow. The majority don’t always cut jobs they just reduce the number of hours worked and turn more full time jobs into part time ones.Which is one of the reasons part time work has grew since the introduction of the minimum wage.

    Neoliberalism has indeed created a new class. They are called the working poor which is a disgrace and a stain to our country. David Harvey in his book A Brief History Of neoliberalism is the best book I’ve read on the subject and he nails it.

    If Scotland is going to produce a more fairer and equal society then yes looking at the minimum wage in some detail would be a start. However, there is so much more that needs to be looked at in conjunction with this and it won’t be easy on small businesses. The increasing costs that are taken off every wage packet just to live need to be looked at in even more detail.

    I’m hoping when John Swinney announces his tax plans in the draft budget later on this week. He tackles high rents and uses the national insurance contributions in an inventive way to help with the inequality in this country.

    • I should say that is if he can. I don’t know if he is allowed to touch national insurance or not. If not it is another thing that needs to be devolved.

    • Inspired by your post, above, I bought Harvey’s Brief History today, for my kindle. It is a gripping read. Written in 2005, it offers a perspective from which the referendum result was entirely predictable. The threat of an independent Scotland that was attempting to move away from neoliberalism, was certain to be stamped out by the international ruling class. As Harvey points out, they don’t care about democracy.

  2. Dan,

    I see you play a major role in the youth for independence

    Ask all of the 16-17 year olds who voted in the referendum if they want to play a part in sharing economic knowledge around Scotland. This includes those who voted yes and no. Then task the ones that do to set up a project called Pass it on or Pay it forward.

    What Pass it on will be will mirror the old book worm club but there will only be 4 books to pass on every 12 weeks. It will be like a book group for the nation and not only encourage youngsters to read about economics and politics but every age group.

    The 4 main political parties give a book to the pass it on project run by the 16-17 year olds. They political parties pay for them by getting a good rate from the author and the publisher and buy them in bulk. The 16-17 year olds then distribute them to the public and the schools who get them for free.

    This can be done through a Pass it on website or through various stalls set up throughout the country. The blueprint is there like the stalls used by both yes and no camps in the referendum. All the ways that were used to give out information during the campaign can be used to distribute the books.

    If any of the political parties don’t want to join in then they miss out on this great oppertunity. Pass it on is what it says on the tin once the books have been given out to all age groups across the country once they’ve read a book they pass it on.

    Then during the 11th week of the process STV and the BBC take turns over the year to debate the books with the 16-17 year olds in the studio audience. The format could be like that of question time with the 4 authors being the panel instead of politicians.

    If I was the SNP for the first book I would pick Captive State by George Monbiot.

    If I was the Greens I would pick A Brief History Of Neoliberalism by David Harvey.

    If I was the Tories I would pick Not For turning by Robin Harris.

    If I was Labour I would pick Speak For Britain by Martin Pugh.

    It would be a great way to keep the 16-17 year olds politically active and we can educate the youth and the country at the same time.

    If this was up and running for the 2 years up to the referendum it would have been a resounding YES vote.

  3. Minimum Wage legislation is very problematic, it does act as a “magnet” drawing wages down to its level. There are many other related problems as Derek mentions above – the biggest is the cost of living and inflation. If the cost of living was a lot lower then current wages would be plenty! So, if we just increase the minimum wage without addressing any other issues, what makes anyone think that the cost of living won’t just go up at the same time so no-one is any better off in real terms? In fact poorer people seem to suffer more from inflation than richer people…

    Interesting infographic here:
    http://www.equalitytrust.org.uk/resources/multimedia/national-minimum-wage-uk

    For me, the biggest problem is people’s independence and autonomy. If a person is able to refuse a job offer, then they can ask for a higher wage. Too many people in our society today can’t afford to refuse a job offer because they are landless, without resources or capital. That is the scandal.

    • Yes, inflation is a problem. That’s why you tie the minimum wage to it (and you use real inflation, not what the BoE claims inflation is at – the BoE always underestimates inflation).

      If we think of Holyrood as the thing that protects us against Westminster policies, then the two things I can think of that would do the most good for that protection is if Holyrood had control over Minimum Wage and Socal Security. We get those and we can stop people dying of starvation or exposure.

      Next after that is we need to get ourselves back to 100% employment, so that employers have to compete for employees, rather than the other way around. (100% employment pushes up wages and working environment quality, our current unemployment scandal pushes them down) I’m not sure how we push employment % up though.

      Of course, for a full federal solution, we should be talking about what powers are reserved to Westminster, rather than the other way around.

      • Raising the minimum wage actually increases employment % on its own – because people are not forced to work long hours or multiple jobs to survive. This is a primary reason ‘business’ doesn’t like it (there is now plenty of evidence that because better pay improves both productivity and demand, raising wage minimums *across the board* does not cost individual businesses more long-term.)

    • Living wage must be the foundation of any government in Scotland, as soon as it is permitted. People like me will just have to grin and bear it, pay up through taxes or prices, and smile because they know they are making at least a little impact on the poverty and inequality which disgrace our country.

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