Should business fear the burdens imposed by Labour?

It is hard for anyone with scruples to argue that a moderate minimum wage is a bad thing

ABOUT 2 million people will take home more pay as a result of the national minimum wage, formally introduced today. Low as it is, at pounds 3.60 an hour for the over-21s and pounds 3 for younger workers, it will affect one in every 11 people who are at work in this country.

A majority of them will be women working part time. Most will be in the North. Many will be in dead-end jobs in retailing, restaurants, and health and social services. Women, young people, disabled employees and members of ethnic minorities are the most likely to be working for less than the new minimum wage.

The boost to low incomes therefore aids the most peripheral and exploited employees, doing jobs most of us would never dream of accepting. Indeed, so few people are doing them legally in London and the South-east that it is a fair bet that only immigrants in the informal economy are willing to take them.

It is hard for anyone with scruples to argue that a moderate minimum wage to protect the most vulnerable workers is a bad thing. Yet, increasingly, business has been voicing the fear that what may seem a sensible measure taken by itself is one burden among many that the Government is placing on employers. It joins the working-time directive limiting hours, the fairness- at-work measures that will allow union re-recognition, and the employer-administered working families tax credit.

Last week Stephen Byers, the Secretary of State for Trade and Industry, responded to these business anxieties by announcing a red tape review. He has already scrapped some of the regulations implementing the minimum wage.

How is it that what ought to be a badge of civilisation - basic decent treatment of people who work - has come to be a symbol to British businessmen of governmental oppression? What is particularly strange is that there is relatively little red tape in the UK compared to countries such as Germany - or even the US, which is surprisingly bureaucratic.

The Government has repeatedly deferred to business interests in the consultations on its workplace measures - setting a much lower minimum wage than union negotiators were after, for example. Yet employers' organisations are arguing that the Government's proposals will cost jobs and bankrupt companies.

They point to the fact that Britain is continuing to attract foreign investment. In a recent row over tax increases proposed by the German government, some of Germany's biggest employers, such as the insurance giant Allianz, threatened to move lock, stock and barrel to the UK. The Confederation of British Industry and Institute of Directors warn that the attractiveness of the UK as a business location could be eroded by importing Continental-style regulation and costs. In a speech to Manchester businessmen last week, Sir Clive Thompson, chairman of the CBI, sounded the warning again.

"I don't mind, and I'm sure you don't mind, working until midnight on a world-beating marketing plan. But using that time, as many small business managers do, to pore over the VAT forms or decipher the 74 pages of the guide to working time issued by the DTI, is not wealth creation as I understand it," he said.

There is something quite compelling about this argument at a time when unrestricted Anglo-Saxon capitalism is thriving and other, more managed types, ranging from the Asian values variety to the German stakeholder kind, are languishing. Which bits of the world economy are shrugging off the global crisis? The US and the UK. Where is unemployment falling? You guessed it.

Of course, some Gradgrinds will oppose anything that helps the workers at the expense of the bosses. It may not be the latest business-school- approved style of management, but it is a common enough attitude. Britain has plenty of these hearty executives with loud laughs and ample waistlines, pillars of the community, whose ambition is to run the most efficient sweatshops they can get away with. Not for them the challenge of improving their workforce's skills and switching to high value-added production methods. No Brussels bureaucrat will force them to price their wretched employees out of a job.

But it is the global context that explains why so many in the business community are concerned about importing any Continental workplace habits into the UK. The flexibility of the jobs market - usually taken to mean flexibility for employers to pay what they like to whom they like when they like - has become a talisman in difficult times. The Thatcherite deregulation of the workplace is the lucky rabbit's foot of British business.

The difficulty with dismissing this as outmoded Eighties thinking, however, is that there is real merit in some forms of workplace flexibility. Part of the explanation for the high rates of unemployment currently experienced in Continental Europe lies in minimum wages that are too high for some kinds of work, and in red tape and high taxes that discourage companies from creating new jobs. Germany and France have not seen jobs created in the private sector over the past two decades.

To conclude, however, that we can have either flexibility or fairness - but not both - is to pose a false dichotomy. The fact that there is a trade-off does not force us to choose either one or the other. It is neither inconsistent nor idealistic to believe both that a fair society is one that provides work for all who want it, and, at the same time, that jobs should provide minimum levels of pay and dignity. How to achieve the best of both is an empirical matter.

So, for example, there is pretty clear evidence that the minimum wage in the US is so low that it has no impact at all on the level of employment, while in France the youth minimum wage is so high that half that age group is out of work. With the new UK minimum wage, the Government has sensibly kicked off with a level unlikely to destroy many jobs. It can rise over time, testing the trade-off, although the formal mechanism for uprating the figure has yet to be announced.

Ultimately, the businessmen's complaints about their new burdens are not about the practicalities or the evidence. These down-to-earth concerns do matter, but the Government is going out of its way to answer them. New Labour has no interest in seeing investment decline or jobs vanish. Rather, the emerging dispute is philosophical, a clash of world views. Social partnership is not a home-grown idea, and it is proving to be slow to put down roots in British business.