Letter : A dishonest remedy to low pay

From Mr Phillip Oppenheim, MP

Sir: I share Andrew Marr's desire to see the less well-off better paid, but have doubts about the solution he proposes and question some of the claims in his article "Even hamburger flippers have to eat" (18 May).

The way, surely, to achieve sustainable increase in pay is to improve people's productivity through better education standards, training and by creating the conditions for sustainable growth. Whereas both Britain's productivity and real pay levels stagnated in the late 1970s, the 1980s and 1990s have seen huge increases in productivity and competitiveness leading to real increases in pay at all levels. A single man at the bottom 10 per cent of earnings is pounds 25 a week better off, after taking account of prices and VAT changes, than in 1979.

Andrew Marr is incorrect in saying that all of our competitor countries have minimum wages. In fact, only around half of European Union countries do and almost all suffer from far higher unemployment, and especially youth unemployment, compared with Britain.

Those EU countries that have a minimum wage set at the type of levels proposed by the TUC, Belgium and France, had a worse rate of employment growth than Britain over the last full economic cycle (1979-1990), which is the figure used by the OECD for relevant international comparisons. In the US, the minimum wage is currently at a low percentage of average earnings - far lower than the level proposed by the TUC for Britain. Moreover, it has not been raised in cash terms for some years.

It is true that in-work benefits are available to some people on low pay, but the cost of the additional unemployment benefit which a minimum wage would give rise to would almost certainly be greater and the Institute of Fiscal Studies, among others, has shown that minimum wages are badly targeted and are an inefficient way of helping the less well-off; in-work benefits are the way to reach those in need.

The minimum wage is a seductive, but ultimately dishonest remedy to low pay. It is dishonest because it pretends that there is some easy, no-cost solution. It is doubly deceitful because Labour has said that it will not indicate a level before the next general election - a clever but cynical ploy because they know that a low level would alienate the unions and the left, while a higher level would clearly cost jobs. As Sir Gordon Borrie, chairman of Labour's Social Justice Commission, himself said: "Too high a figure would cost jobs; too low a figure will not be worth having." The less well-off deserve more honesty from Labour.

Yours sincerely,

PHILLIP OPPENHEIM

Under-Secretary of State

Department of Employment

London, SW1

19 May