Some people in Britain today are earning an hourly wage that won't even buy a Big Mac and small fries. Is this the society we want?

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TUC minimum

pay call sets

test for Blair

The Trades Union Congress is this week expected to embarrass the Labour leadership by backing a call for a national minimum wage set at pounds 4.26 an hour.

In an attempt to minimise the impact, however, the annual congress in Blackpool is also likely to endorse a resolution which indicates that a figure of more than pounds 4 might be "reasonable" and a seemingly contradictory statement which argues that a "bid" should be postponed.

John Monks, general secretary of the TUC, said yesterday that the three propositions would inform the development of union policy during the coming year and in the lead-up to the general election.

The minimum wage is likely to be the first real test of how far the Labour leadership is prepared to go to accommodate the unions, which will press for early introduction if Labour wins. More than 3 million people in Britain earn less than pounds 3.50 an hour; 70 per cent of them are women. More than half of them work part time.

Mr Monks' diplomatic statements yesterday contrasted with his plea at the TUC's Ruling General Council last week that the motion urging a figure of pounds 4.26 should not be put to conference. The TUC leader was defeated by 19 votes to 15.

It is clear, however, that the union movement's position on the minimum wage has been watered down considerably over the years to prevent the Conservatives making too much political capital out of the issue.

John Edmonds, general secretary of the GMB general union, said the TUC debate - scheduled for Wednesday - was an "indulgence and irrelevance" because the statement postponing a bid, which was backed by the general council, would take precedence under the TUC's constitution. "We are going to have a drama on Wednesday, but it will be completely devoid of reality," he said.

The debate over the issue will come the day after Tony Blair visits Blackpool to attend a dinner with union leaders. He is insisting that the party should not adopt a figure and that a low-pay commission would be set up to advise a Labour cabinet.

Unison, the public service union which is proposing the pounds 4.26 motion, studiously kept out of the limelight yesterday. However, Bill Morris, leader of the Transport and General Workers Union, whose delegation will vote for the Unison proposition, argued that all three resolutions were compatible.

The TUC yesterday released evidence that small firms were already paying above the level of any likely statutory minimum wage. Congress House analysis of the official Labour Force Survey reveals that average pay in Britain's smallest workplaces - those employing 10 or fewer people - is pounds 5.52 an hour. Companies employing between 11 and 19 workers paid an average of pounds 6.33 an hour and those employing more than 50 paid pounds 8.05.

Opponents of the law have always insisted that while larger companies might be able to afford a minimum, smaller firms would be forced into liquidation. But a MORI poll conducted for the GMB showed that three out of five small businesses supported the policy.

A study of larger companies in the retail and hotel sector by the Labour Research Department for the GMB showed that businesses could expect their profits to be reduced only marginally. The union said that Sainsbury and Tesco could expect their profits to be cut by around 6 per cent while Marks and Spencer and Safeway could expect returns to drop by 3 per cent and 1.7 per cent respectively.

View from

the Jobcentre

'We sit them down and

say: This is all you'll get'

Stephanie Kay's Jobcentre operates its own minimum wage policy. "Our cut off point is about pounds 3 per hour. Anything below that I would query. Employers do try it on a bit."

Ms Kay, a supervisor at Orpington Jobcentre in Kent, said: "Our first aim is to tell the employer that the salary needs to go up. In most of the jobs we've got I can give them a comparison."

She and her colleagues encourage the unemployed to take jobs for less money than they might have wanted, and top them up with benefit.

"When people first come in, their major concern is always how they're going to survive. If they have qualifications, we actually give them a permitted period of up to 13 weeks where they can concentrate on looking in their own areas of expertise, on the salary they want. After that time they might have to reconsider and broaden their horizons a bit," she said.

The newly unemployed often have firm ideas about how much they need to earn and generally know what the going rate is for their skills. But sometimes this has actually dropped since they entered employment.

Some unemployed people do not take kindly to having to work for pounds 3 an hour - despite"top up" benefits. "Yes ... where we encourage them to come off benefit, people will put obstacles in the way. They do things like mucking up interviews - but employers give us feedback."

"Work trials" allow both employer and employee to try each other out for three weeks and Jobcentre staff also tell clients how to claim Family Credit and incentives such as training vouchers, which they can cash in to "top up" their skills.

Ms Kay added: "So someone may take a part-time job in a warehouse, and they can actually use pounds 300 training vouchers to take driving lessons. It's very popular - allowing them to make decisions to how they want to train."

She admits that the relationship between staff and the unemployed was often poor. "Our job is instilling confidence in people. Five years ago perhaps that message wasn't getting across. It's a less confrontational relationship ... Once they know we're not here to penalise them and catch them out, then you can turn whole thing round." Jojo Moyes

A life on

low pay

'I can't afford to lose my

job. Others would take it'

Dean Smith, 31, earns pounds 3.20 an hour. This is 20p more than when he started at his company nearly three years ago - and 70p an hour more than many of the jobs advertised where he lives.

Mr Smith is a security guard at a leisure complex outside Manchester. He gets no overtime and works up to 60 hours a week, mostly evenings. "I've been doing mainly unskilled jobs since I left school. I'm married with three children and this fits in with the childcare," he said.

He recently escaped a mass redundancy of employees who had been with the company for less than two years by threatening to go to an industrial tribunal. "I can't afford to lose my job. There's always plenty of people out there who would take it."

Although Mr Smith lives in Manchester, he is often sent to other complexes at Preston or Chester. He is given an extra hour's pay, but no travelling expenses. In his last pay cheque, he took home pounds 93 after tax for 34.75 hours. Money is deducted for his 15-minute tea break.

"The worst thing about the job is the unsocial hours. I have to work every weekend. The other day they made me come all the way in to show this lad around on my night off - they paid me for one hour at pounds 3.20. But if I say anything they'll just cut my hours down," he said.

"You do get holiday pay, but they calculate it depending on how many hours you've worked in the 12 weeks previously, so they cut your hours down deliberately." For last year's 10-day holiday he was paid for 19 hours.

"People don't realise what sort of life we have to lead. In my area you see jobs advertised for pounds 2.50 an hour. The employers know you can claim family credit and they will just cut your wages," he said.

Mr Smith does not feel that his job would be in danger from a minimum wage, "because people always need security guards. That extra pounds 1 would mean at least pounds 35 a week for me".

He believes it would make a difference to his relationship with his employers. "I would feel differently about my employers if I got paid more - as it is they make you feel like you're not worth anything, that you're just a commodity."

t Mr Smith asked that his real name not be used because he feared it would affect his job. Jojo Moyes

A blunt instrument that would fail to cure poverty

Yes

says John Cridland

Director of Human Resources Policy, Confederation of British Industry

Low pay is an emotive issue. It's not surprising that so many people are attracted to the idea of a simple solution - a national minimum wage. But it is important to examine what a minimum wage could really achieve. Could it really alleviate poverty without significantly damaging the economy in other respects? The Confederation of British Industry firmly believes that the answer is no.

On Thursday, delegates to the Trades Union Congress will vote on a motion to demand an incoming Labour administration to set a minimum wage at pounds 4.26 per hour. This figure represents half male median earnings. Such a policy would have serious implications for the economy.

Consider the cost impact on employers. A pounds 4.26 minimum would increase the national wages and salaries bill by pounds 5.7bn. A staggering figure, equivalent to the direct cost of employing nearly 300,000 people on average earnings. But the true cost would be higher as these figures do not take into account restoration of pay differentials or their impact on inflation.

This increase has to be paid for. Some of those on low incomes would pay by losing their jobs or the prospect of jobs. In industries such as clothing, cleaning or catering, some businesses will have no option but to shed jobs.

The costs of a lower minimum wage would be smaller but still significant. The issues remain the same; increased inflation, unemployment and the unknown effect of restoration of pay differentials. But what really matters is what a minimum wage would achieve.

The key argument in favour has been that it would alleviate poverty amongst the low paid. But more than half of the poorest 10th of households have no wage earners at all. Only one-quarter of those on low pay are the principal wage earners in their household. Thus a minimum wage would be a very poor mechanism for targeting help on the poorest families. Poverty thrives on unemployment. The CBI believes that attention should be focused on measures to help people get off welfare and into work through in-work benefits such as family credit.

Proponents of a minimum wage claim that employers collude with their employees in order to defraud the benefits system. Yet there is clear evidence from government research that employers take no account of the in-work benefits system when determining their wage-setting strategies. While the pounds l.5bn annual cost of family credit is significant, that money goes directly to those families whose needs exceed their earnings. A minimum wage at any foreseeable rate would not eliminate the need for such top- ups. And to the extent that unemployment is increased, the strain on the Exchequer could be multiplied, not reduced.

The goals of those who support a minimum wage are laudable. But in practice a minimum wage is a blunt and inefficient mechanism which would fail adequately to tackle poverty. It would hurt many of those it is supposed to help. Labour and the trade unions should think again.

No

says Yvette Cooper

'Independent' leader writer and economics columnist

The victory of compassion over economic sense; such is the way opponents try to portray the minimum wage. Labour and the Trades Union Congress are - according to the right - reacting with their hearts not their heads to the plight of employees such as Dean Smith, by advocating a minimum wage that will push low-paid workers out of jobs altogether.

But this is nonsense. Lost in old ideology and abstract theory, the anti-minimum-wage lobby has failed to notice that the world has changed. Both the evidence and the new theories about the modern labour market show that a sensible minimum wage does not cost jobs. Even more important, a minimum wage is essential for helping people into work. Without it, a welfare-to-work strategy will be a waste of taxpayer's money.

Admittedly the arguments made against it have some intuitive appeal. If wages are pushed up too far, employers will surely lay staff off. However, good economists and policy makers look at the real world. All the recent evidence reveals that a minimum wage at a sensible level does not reduce employment.

Take the United States, for example. Academic research showed that when the New Jersey minimum wage rose from $4.25 to $5.05 in 1992, employment in the low-paying hamburger joints actually went up. Here at home, similar research at the London School of Economics demonstrated that the wages councils (and the sectoral minimum wages they set) did not hold back employment in the Eighties, nor did their abolition create more jobs.

Dean Smith's experience provides some clue to why a minimum wage need not cost jobs. Security companies are facing rising demand for their services, with no competition from low-wage labour in developing countries. Wages are low because they compete with each other to keep profits up and costs down. Turnover is high as employees seek better jobs, and firms always need new staff. A national minimum wage might reduce security companies' profits. It might also make it easier for them to find motivated employees who stick with the job. But it does not follow that the minimum wage would make them cut their staff.

Moreover, a minimum wage is crucial to the success of any strategy to get people off welfare and into work. Most jobs available to the unemployed are low paid, and leave people no better off than they were on the dole. Expanding work subsidies is the best way to provide the incentive to take jobs. But without a minimum wage, they are useless. Higher family credit payments gives employers an incentive to cut wages further. Although the Confederation of British Industry now denies that this happens, Dean Smith knows his employer already does it.

A minimum wage alone is not a solution to poverty or unemployment. In the long term, Dean needs qualifications and skills if he is to get out of poverty pay. But without a minimum wage, government has little hope of targeting resources to help people like him, and getting the unemployed into work.

How long does it take to earn ...

Big Mac with Television Ford Fiesta

small fries: pounds 2.88 pounds 400 pounds 9,800

Hairdresser 1hour 20 mins 185hrs 28 months

pounds 2.40 an hour

Security guard 1hr 5 mins 148 hrs 22 months

pounds 3.20 an hour

Nurse 25 mins 61 hrs 9 months

pounds 8.80 an hour

Union official 20 mins 48 hrs 31 weeks

pounds 11.50 an hour

Solicitor 15mins 33hrs 20 weeks

pounds 17.50 an hour

Chief executive 1 min 50 secs 4hrs 20mins 13 days

pounds 150 an hour

Calculations tax adjusted

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