‘Boris Johnson to raise minimum wage four times inflation’ was how news agencies reported the government’s decision, announced on 31 December, to accept the Low Pay Commission’s recommendation to increase the minimum wage for over-25s from £8.20 to £8.72 an hour from the beginning of April. What is this? The world turned upside down with a Tory government bringing in a 6.2 percent wage increase by decree?
Not really, as all is not what meets the eye. The Cameron Tory government had already adopted the long-term aim of reducing the wage subsidy to employers represented by the tax credit scheme that makes the income of the lowest-paid workers up to the poverty line. Shifting the burden back on to employers was to be achieved by gradually increasing the minimum wage since as a person’s income increases so their tax credit payment goes down.
Marx didn’t think much of minimum wage legislation. In 1880 some members of the newly-formed French Workers Party came to London to ask him to help draw up their election programme. It consisted of two parts, the long-term aim of socialism and a list of immediate demands. Afterwards Marx wrote a letter in which he said that the second part included ‘some trivialities which Guesde found it necessary to throw to the French workers notwithstanding my protest, such as fixing the minimum wage by law, etc (I told him: “If the French proletariat is still so childish as to require such bait, it is not worth while drawing up any program whatever”)’ (LINK). Presumably he felt that it went too far as a vote-catching bait as it was unrealistic and unenforceable.
Maybe it was at the time but nowadays most developed capitalist countries have such laws. In 1999 the Blair Labour government introduced a national minimum wage (previously this had existed only for some sectors such as for agricultural labourers). In 2015 the Tory government renamed the rate for over-25s the ‘National Living Wage’ (NLW). Probably it has prevented some workers in industries where it is hard to organise effective trade unions from being paid less than the value of the low-grade labour power their employers seek, even though it will have rendered some others unemployable.
In its report on the application of the law in 2019, the Low Pay Commission listed reactions by employers to increases in the NLW: taking a cut in profits, seeking to increase prices, introducing automation, and increasing work intensity. These are the same as to any wage increase, whether imposed by law, trade union pressure, or tight labour market conditions.
The Commission noted that ‘absorbing some or all of the cost of the NLW through a reduction in profits was often the most common response’. This would be a sign that competitive conditions didn’t allow a price increase; the Commission itself noted that some businesses ‘do not have this option, whether because of market structures or reliance on government funding’. So much for the myth that wage increases cause rising prices.
Worrying from a worker point of view, but par for the course, is the fourth option of work intensification:
‘Employers reported expecting more flexibility and effort from staff, adding tasks to job roles and raising performance standards. Workers told us of the increased pressure they have come under from such changes.’ (tinyURL.com/t77l89t).
The working for wages system is a trap from which there is no escape. What you get from one hand is often taken away by the other. No wonder Marx urged trade unionists to work for its abolition.