Big Debate: Minimum Wage

East Ham MP Stephen Timms

East Ham MP Stephen Timms - Credit: Archant

Labour leader Ed Miliband recently vowed to end Britain’s “chronic dependency” on cheap foreign labour if he wins the next election. In an article for the Independent on Sunday, he promised to stop firms paying agency staff less than permanent workers by closing a loophole in the law. He proposed increasing fines for firms that breach minimum wage legislation. This week Labour MP for East Ham explains why he backs increasing the national minimum wage while Liam Kane, chief executive of the East London Business Alliance, says that won’t be enough.

Liam Kane, chief executive ELBA

Liam Kane, chief executive ELBA - Credit: Archant

Stephen Timms, MP for East Ham:

“This year marks the fifteenth anniversary of the National Minimum Wage (NMW). It boosted pay at the bottom without leading to job losses, and has wide industry support. Now £6.31 per hour, it has fallen in real terms under this government, contributing to the current cost-of-living crisis.

Before the NMW, some people were paid as little as £1 an hour. The Tories bitterly opposed the NMW legislation, and low pay has worsened under this Government. The value of the minimum wage has declined by almost 5 per cent since 2010, and families are on average £1,600 a year worse off.

The NMW is also not being enforced properly. There have been only two prosecutions in four years, despite evidence that 300,000 people in the UK earn less than the minimum wage. The call by the Mayor of Newham for councils to be given enforcement powers has been backed by Labour in Parliament. And Labour has called for a tenfold increase in penalties for rogue companies that don’t pay.

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We also want the Government to encourage employers to pay a Living Wage. The idea of the Living Wage - currently £8.80 per hour in London - was developed in East London by London Citizens.

Last November, Ed Miliband committed a future Labour government to new ‘Make Work Pay’ contracts: firms which sign up as Living Wage employers in the first year of the next Parliament will get a 12-month tax rebate - worth an average of £445 - for every low paid worker who gets a pay rise. That will be good for employees, and - because it reduces the bill for tax credits - it will also reduce benefit spending.

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Low pay is a growing problem. There is an urgent need to increase the National Minimum Wage, and to promote the Living Wage too.”

Liam Kane Chief Executive of the East London Business Alliance

“ELBA is pleased that there is likely to be an increase in the minimum wage of at least 50p per hour and maybe even by enough to get to £7 per hour, which would see its value restored to the level applying before the financial crisis. Let’s hope the Low Pay Commission is feeling generous when it considers its options.

ELBA has long believed that the challenge of closing the gap between the area’s extraordinary wealth and some of the country’s poorest neighbourhoods is best accelerated by increasing access to sustainable, well paid employment and the opportunity to increase an individual’s social capital.

To that end, ELBA’s Employment and Skills Programme last year supported 809 east London residents either to start or return to work and encouraged ELBA member companies to support our efforts by providing entry level roles with the majority offering the London Living Wage (LLW).

Our members recognise that they need solid, reliable and committed employees who are paid realistically if they are to have all the services they need to run their businesses efficiently so this move is to be welcomed. One word to the Chancellor - please also look at the effects of the punitive, over 90% rate of marginal taxation that can result from the withdrawal of in work benefits as the minimum wage rises - that surely can’t be right in the long term.”

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