Thomas Paine

Thomas Paine
"These are the times that try men's souls. The summer soldier and the sunshine patriot will, in this crisis, shrink from the service of their country; but he that stands by it now, deserves the love and thanks of man and woman."

Monday, 27 September 2010

Will the Minimum Wage have to be reduced or dispensed with?

Although it must be hoped the coalition is successful in reducing the nation's deficit through savings and are able to increase economic activity to provide increased tax income - the unexpectedly high borrowing last month does not stimulate confidence.

There is no doubt the coalition is creating an environment more conducive to business activity and small businesses, which require little finance, will find niches in the market to be able to flourish, however, with the banks still reluctant to lend and the giant corporations having grabbed so many of the business opportunities - it will be only the most inventive and determined who will be able to break into this fierce market place.

It is the ever freer global market which has created this fierceness of competition with the global corporations able to seek out the cheapest labour costs virtually anywhere in the world. In previous times there were goods marked 'made in Hong Kong' which, generally, indicated that the item was made shoddily, however, with China, in particular, opening up its massive labour market goods produced in the Far East no longer indicate poor quality - more often quite the reverse.

Given that this labour market, which now also includes India, will become increasingly active over time, it is difficult to imagine how the British workers who are most comfortably engaged in manual work will be able to find gainful employment within the parameters of the minimum wage. To compound matters, since the ratification of the Lisbon Treaty, we have also seen an increase in UK based companies moving their production sites to Eastern Europe to take advantage of cheaper labour costs - the minimum wage also contributes to this shift.

We must presume the coalition's plan is that the improved business environment will generate greater global opportunities for companies based in the UK. This should, in turn, lead to increased earnings for the, UK based, non manual workers of these companies and their shareholders, which will then, in turn, provide greater business opportunities for service companies [those services which can be provided only in the UK] which will again, in turn, generate jobs for manual workers.

Given that cheap labour will be available somewhere in the world for many years to come, without dispensing with or lowering the minimum wage - it is difficult to see how else those most suited to manual work will be anywhere close to fully employed for many years ahead.

From a global standpoint, a system which provides the poorest in the world with opportunities to obtain work, leading to their circumstances being improved, must be seen as a step forward. However, previously, it was believed that this process would raise the earnings of the most deprived, globally, to close to that of the highest paid, but as the laws of demand and supply in a free market dictate, should there be an excess of labour - those paid the highest will have to reduce their rates if they wish to be employed.

So should the recovery not be as successful as hoped, or even if more successful, there is a distinct possibility that those most suited to manual labour will be severely underemployed. Should the recovery be less successful than hoped or the recovery stalls - would the best solution be to reduce or dispense with the minimum wage? If the recovery is more successful - would it be better for the government to pay employers a premium to employ UK workers? This could be preferable to the Gordon Brown solution of having masses paid unemployment benefit or disability allowance - if it can be afforded!

From a personal stand point, I seriously doubt if there are many who can really feel a sense of inner worth and/or feel included in society, if they are not, at least, contributing to their own upkeep?

First published Liberal Democrat Voice 02.10.2010

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