Thursday, February 12, 2009

On The Minimum Wage

Christopher Chope MP, you rock!

Mr Chope has introduces a ten minute rule bill calling for more flexibility in the National Minimum Wage to enable "voluntary opt-outs". His speech can be found in full over at ConservativeHome, but here are is the distilled goodness for your delectation...

Two months ago we were celebrating the 60th anniversary of the universal declaration of human rights. Article 23.1 states:

    “Everyone has the right to work, to free choice of employment, to just and favourable conditions of work and to protection against unemployment.”

Article 6 of the international covenant on economic, social and cultural rights, to which the United Kingdom is a party, states:

    “The State Parties to the present Covenant recognise the right to work which includes the right of everyone to the opportunity to gain his living by work, which he freely chooses or accepts, and will take appropriate steps to safeguard this right.”

It may come as a shock to many Members of this House to know that, currently, many people are not given the rights to work enshrined in those important United Nations articles

Indeed. Today there are many barriers to free contract, but no doubt that bombshell whizzed over the empty heads of many, as I'm sure did the importance. But no fear; Christopher carried on to alliterate...

The second and much larger group who will be helped by my Bill are those who are currently out of work but would be willing to work for less than the minimum wage, which is £5.73 an hour or £11,918 a year based on a 40-hour week. Our Government make it illegal for an employer and an employee freely to negotiate the level of remuneration if it is less than £5.73 an hour for an adult, unless, of course, the work involved is unpaid voluntary work.

Before anybody accuses me of wanting to impose poverty wages, let me emphasise that I am talking about arrangements for freely consenting adults. The Government regard an income of £11,918 per year as much in excess of an employee’s personal needs. That is why a single person on that salary is required to pay no less than £1,887 in tax and national insurance, thereby effectively reducing their take-home pay to £4.82 an hour instead of the £5.73 that it is nominally.

Why should it be illegal for someone voluntarily to accept pay of £4.82 an hour? After all, that is all that is left in their pocket if they are paid the minimum wage of £5.73. Giving people the freedom to opt out of the minimum wage would help not only those who are out of work but those in the hard-pressed retail and hospitality sectors where businesses are going down like ninepins. How many such small businesses could be saved if those working in them had the freedom, in conjunction with their employers, to agree to reduce their wages?

Fantastic stuff. Why should employer and employee not be able to set their own wage level? Particularly, low wage jobs are generally among the hardest hit and first to go in times of economic difficulty. Low wage jobs tend to be low skilled jobs and thus exposed to the greatest competition as newly unemployed skilled workers are capable of filling the role if needs must.

Allowing pay rates to revalue according to the economic situation would help restore natural correction to the economy, and allow those at the lower end of the income scale to maintain their jobs, albeit with a pay cut. Or to look at it another way - why should higher paid skilled workers be able to negotiate a pay cut in return for keeping their jobs, but low paid unskilled workers denied the same opportunity and be forcibly thrown back on to the unemployment heap?

Andrew Mackinlay (Thurrock) (Lab): It would be unfair competition.

Mr. Chope: The hon. Gentleman says that it would be unfair competition, but we are talking about the marketplace and people should be free to compete in the marketplace without restriction. A reduction to, say, £4.82 would be more than 15 per cent. below the minimum wage and would also save employers national insurance on-costs. It could thereby transform the economic viability of such a small business by substantially reducing overheads.

Voluntary wage reductions are increasingly commonplace in the private sector. I visited a small engineering company in my constituency on Friday where everyone has voluntarily taken a 10 per cent. pay cut. About half the work force have also been made redundant. Workers in other large firms such as JCB and Corus are reported to have done the same to enable their firms to be more competitive and to reduce the overall number of redundancies.

Of course we should hardly expect such a eloquent and reasoned explanation to be understood by such an odious and illiberal MP. Quite how free competition and voluntary agreement is unfair is beyond me. Mr Chope is, of course, right that a reduction in wages does help maintain the viability of a job and the employer itself. It makes the employer more competitive and it reduces on-costs.

One further sting in the eye of authoritarian socialism was offered by Mr Chope...

The right to work covers not only the issue of remuneration but how many hours are worked. I have received letters from constituents who are worried about the potential impact of the loss of the opt-out from the 48-hour week, which was applauded by Labour Members of the European Parliament only late last year. My constituents argue that they should have the freedom to work whatever hours they decide, in conjunction with their employers. What reasonable man could argue with that? Indeed, that right is recognised by the United Nations, even if not by the European Union.

Absolutely. No Government should ever have the power to deny any individual the freedom to apply their labour and time in any way they so wish.

The solution to the current economic problems is freedom. Allow the economy to naturally adjust and rebalance and the pain will be no longer than it needs to be; attempt to control and frustrate the change and the pain will be be longer and deeper.


Nathan February 12, 2009 at 2:38 PM  

Completely agree with you, Mr Chope is living somewhere white and fluffy...

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