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National Minimum Wage

Volume 281: debated on Wednesday 17 July 1996

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To ask the President of the Board of Trade what assessment he has made of the impact on the number of UK jobs of the introduction of a national minimum wage at a level of £4 an hour. [36067]

The President of the Board of Trade and Secretary of State for Trade and Industry
(Mr. Ian Lang)

Officials in my Department estimate that a national minimum wage set at £4 an hour, and with only half restoration of pay differentials, could result in the loss of 1 million jobs.

Has my right hon. Friend been able to do any calculations on the basis of documents produced by the Labour party before the last general election, which included a calculation of how minimum wages should be set and said that they would start at half average earnings and move to two thirds? Can he confirm that, on today's high wages, created by the Conservative Government, that would be £4.46 to start and £5.54 in the full Parliament? Can he confirm that in America, whose example is often quoted by Opposition Members, real earnings per hour for the minimum wage are about £2.30?

My hon. Friend is absolutely right to draw attention to the dangers of the minimum wage. A minimum wage would be ratcheted up in the way that he implies and, obviously, the higher it went the more jobs would be lost. It would not only be jobs lost; it would be company profits hit and inflation stirred up. That was the view of a study by Kleinwort Benson. Similarly adverse findings resulted from studies by the Organisation for Economic Co-operation and Development and the International Monetary Fund and appeared in the EC White Paper "Growth, Competitiveness, Employment".

Even with the increase proposed for the current year, the minimum wage in the United States would be about £3. That bears no comparison to the territory that the Labour party is in.

Is it not the height of hypocrisy for there to be such strenuous opposition to a national minimum wage from Tory Members, who usually have at least one outside interest and, in many cases, have a host of directorships?

If poverty wages are to be maintained, how will people be able to take out private insurance along the lines described in the leaked document from the Treasury? That leaked document demonstrates what a nightmare it would be if this Tory Government were re-elected.

It is not just the Tory party that opposes a minimum wage; the Confederation of British Industry, the Institute of Directors, the chambers of commerce, industry, small businesses, the engineering industry and the clothing retailers' industry oppose it. As the hon. Gentleman is in the business of talking about hypocrisy, he might reflect on the fact that the bottom 10 per cent. of the work force have enjoyed an increase in take-home pay under this Government of £27 a week in real terms whereas, when the Labour party was in government, that bottom 10 per cent. suffered a reduction of £1.

Is my right hon. Friend aware that Unison, which acts as a sponsor of some Opposition Members, has called for a national minimum wage of £6 an hour? Would that not mean that even more people would be unemployed, and is it not immoral for Members of the House to vote for the unemployment of their constituents? Does that not demonstrate that new Labour means new danger?

My hon. Friend is absolutely right, and those who are most vulnerable, who are least skilled, would lose their jobs first. The undoubted consequence of this policy of the Labour party, like so many of its other policies, would be an increase in unemployment and inflation and a loss of competitiveness.

The President knows full well that Labour has not set a figure for a minimum wage. Does he accept, however, that, in a report published yesterday, the OECD stated that a minimum wage would not cause job losses for women, young people or the unskilled? Does he further accept that the Employment Policy Institute has said that a minimum wage would not cause job losses? Does he accept that a New Jersey survey shows that increasing the minimum wage takes people out of unemployment by removing them from the poverty trap? If, in the face of that overwhelming evidence, the right hon. Gentleman does not accept the facts, will he tell us the lowest pay that he would expect people to work for—and the lowest wage that he would work for himself?

I do not accept the hon. Gentleman's so-called facts. All the evidence from all the studies that we have seen points in the other direction. Only today, the CBI produced its manifesto in which it points out the dangers of a national minimum wage. Unemployment among youngsters, the most vulnerable category, in countries with a national minimum wage is running at 25 per cent. in Belgium, at 27 per cent. in France and at 42 per cent. in Spain. That should make the hon. Gentleman realise the real dangers that a national minimum wage would bring to young people.

It is about time the Labour party told us what its national minimum wage would be. Why do not Labour Members come clean and defend the policy in which they pretend to believe?