... and give people a living wage

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The Independent Online
Cheryl sews frills on petticoats, earning pounds 10 in 10 hours. Carol earns pounds 2.50 an hour cleaning offices at four in the morning. Diane is paid pounds 2 an hour cleaning in a pizza restaurant.

A minimum wage is one of the most radical policies new Labour has left, offering a real chance of escape from the benefit trap - albeit at a price. The cost of this policy is honestly assessed in a persuasive report today published by the Employment Policy Institute (Employers and a National Wage by Fred Bayliss).

There are a great many Cheryls, Carols and Dianes. Some 72 per cent of waitresses are paid under pounds 3.50 an hour (Labour's presumed minimum wage rate.) So are 36 per cent of textile workers. Nearly everyone paid under pounds 3.50 is a woman part-timer, which explains the continuing chasm between men's and women's pay. (Women manual workers get only 73 per cent of male manual wages.)

Women can only afford to do these jobs because they have working partners, so when people talk anxiously about the huge growth in women's jobs compared to men's - another death blow to men's self-esteem - this is the unappealing explanation.

Against the minimum wage is political anxiety. It is a perilous policy for Labour - redolent of the old days of the Prices and Incomes Board. For the red rose party with mobile phones, the minimum wage looks like a cloth cap and an old knapsack worn over an Armani suit. It carries the baggage of trade unionism, tainted with an anti-market crude egalitarianism.

Some economists argue that if wages went up, employers would sack many of the low-paid. How can we compete with the tiger economies if we pay our workers so much more than they pay theirs? And what about wage inflation? Wouldn't everyone scramble to keep up their differentials?

Dr Fred Bayliss, former chairman of the Employment Policy Institute, interviewed employers who would be most affected. Other surveys have questioned all employers: the Reed survey last week found 49 per cent of employers approved of a minimum wage. But those who pay above the likely minimum wage support it because they expect to clean up when more marginal businesses go to the wall. Small supermarkets, for instance, pay lower wages than big chains, who mostly already pay above Labour's presumed minimum wage level.

The Bayliss survey tried to find out which businesses would suffer the worst damage. The answer was: caterers, cleaners, hairdressers, private health care and clothes manufacture. Bayliss concludes that most low-paid jobs are in services, not manufacturing, so they are not competing with tiger economies. The demand for services is unlikely to decline. Employers will put up their prices to cover the cost, secure in the knowledge that everyone else will do the same. Some small firms will go to the wall, but their business and jobs will be swallowed up into bigger enterprises. People will still eat pizzas and hamburgers, still get their hair done and go into old peoples homes, even if it costs a bit more.

Those most at risk are the 250,000 clothing workers, whose companies really are competing with cheap imports. Although a minimum wage will be a blow, however, it will be of far less significance than the chill winds from abroad that the industry has faced for the past 100 years, says Bayliss. Problems in one fairly minor sector hardly justify ditching the good it will do elsewhere.

The best argument for a minimum wage is Labour's welfare-to-work strategy. A lot more people will be urged off Income Support and into work topped up with Family Credit. But without a minimum wage the state will subsidise ever more marginal, lame-duck or Scrooge employers.

These days, new Labour cannot espouse many other serious methods for helping the poorest. It cannot put up benefits (and anyway that only makes the poverty trap worse). It cannot significantly redistribute income through the tax system - those days are gone and the voters will not stand for it. But a minimum wage, paid for in price increases (just as consumers absorbed the cost of VAT increases) is one of the best practical ways to help the poor without more welfare dependency and an unelectable tax system.

The rate would be universal but could be phased in gradually - and it would be printed on every benefit book, posted in every post office and policed by the same pay-roll inspectors that check national insurance contributions. No exemptions or variations or added complexities, easy to understand and reviewed every year.

Some people will be shaken out of jobs. Some small employers will go to the wall. But in the main, the same jobs will still be done by the same people, if sometimes for different employers. In other words, the costs are sustainable in view of the benefits.

No doubt the Tories will represent Labour's minimum wage policy as a dangerous job-destroyer. This is a prize piece of humbug from a party that has congratulated companies for their efficiency in the widespread slashing and burning of jobs, which has left firms severely downsized, with thousands more out of work and dependent on the ever-growing social security bill.

Labour has to acknowledge that some jobs might be affected by the introduction of a minimum wage, but it can point out, with passion, that the great majority of Cheryls, Dianes and Carols will benefit. And the clincher is that it will draw others currently trapped on state benefits back into productive employment.