Ed Miliband, Labour leadership contender, appears to be making a bold call today:
In a speech at the London School of Economics, Ed Miliband will say he wants to get the Labour Party as a whole behind the “living wage” campaign, calling for a rate of £7.60 in London and a national average outside the capital of £7.16. About five million workers would benefit. The actual minimum wage is set to rise to £5.93 in October. (PA)
At first glance this seemed hugely radical/drastic depending on your point of view; given that it would represent a 28 per cent rise in wages for the lowest paid. Surely the CBI et al should be horrified?
But I’ve spoken to Miliband’s campaign team who assure me the policy would be voluntarily – the idea is to engage employers rather than compel them. In other words, those 5 million workers would only benefit if the entire private sector agreed to go willingly. Seems unlikely. In London only a handful of companies (including Barclays, KPMG and Westfield) have taken the plunge; so far.
UPDATE
In the interests of balance I should also point out that David Miliband has been talking about pay inequality at a Demos event yesterday. He makes a very interesting argument; but I’d still like to see his practical solutions. Apparently DM has no plans for any kind of pay cap for the private sector; so what would he do?
The explosion of pay inequality over the last three decades – and the continuing scandal of the gender pay gap – is an ethical as well as an economic issue. Mega pay awards and bonuses, linked to activity rather than success, violate basic principles of merit and justice. We need to find ways to re-establish moral norms. Unacceptable concentrations of market power, as with unaccountable state power, are not just economically dangerous – as we saw in the credit crunch – to many in this country, they are also immoral. We shouldn’t be afraid to say this for fear of appearing anti-business. The truth is it’s in everyone interests – including the market – that we tackle the excesses.
Jim Pickard
Kiran Stacey