Benefits - Why we wouldn't be having this debate if there was a UK-wide Living Wage

10 Jan 2013

I’m sure many of you were shocked this week at the new low the Coalition government has reached in the debate over its Benefits Uprating Bill, rushed through Parliament at the start of the new term. Senior ministers including the Chancellor have been driving a poisonous wedge between the poor of Britain, a divide-and-rule tactic so naked and vicious that it would make even Machiavelli shiver.

 

According to the Coalition, the justification for the effective cut in benefits to jobseekers, the disabled and those relying on working tax credits is that millions of hardworking people are also facing wage restraint, while they gaze up through the early morning mist at the closed curtains of the ‘shirkers’ across the road, who have no such worries. Not only could this be further from the truth – with so many people relying on state help being in work – and scapegoating of vulnerable people within sections of society, it also gets to the nub of the problem – wages for those in work have been too low for decades.

While the Tories have been busy categorising one of the most diverse societies in the world into neat little packages for the Daily Mail to attack as the root of all our problems, and while Nick Clegg has been agreeing with everything the Tories are doing, only disagreeing with the language they are using to describe it, Labour has woken up and defended those on working tax credits affected by the change, pointing out that these are hardly workshy individuals, and are about to become victims of a ‘strivers tax’. This is a sensible first step, however for a coherent (and moral) argument to be fully realised, it needs to go a lot further, and remind voters that we need not be having this polarising debate at all had wages not been forced down and down over recent decades.

The point of working tax credits, introduced by Labour, has been to effectively subsidise the low wages of employers, which are considered in today’s climate not to be sufficient to live on with a reasonable standard of living. This means that it could be argued that instead of being paid by their employers, workers are being paid by their employers and the state, which also has to pay for those out of work and relying solely on benefits, sometimes because the jobs they once had pay so little they are better off financially being out of work (the oft-mentioned ‘poverty-trap’, which succeeding governments have failed to tackle), sometimes because they have made redundant by an employer relocating overseas. The fact being that workers in developing countries have been able to work for less for decades, and no cuts to benefits or wages in this country are going to prevent that global economic trend taking its course. 

A consequence of our low wages, stagnating in real terms for thirty years or more, is that the gap between those on low pay but in work, and those looking for it, is far too small, and the rational calculation of voters is that after taxes, transport and other stoppages, they are better off not being in work. People are either unemployed in this country because they have been forced to come to this conclusion; because they have been made unemployed through redundancy; or because they are caught in a spiral of low skills, low confidence or are not looking for work (this excludes people like students and people on sick pay). Those who cannot be bothered to work are by no means as large a group as all three main parties would have us believe, not only because most JSA claimants are off it again within six months, but also because it is pretty difficult to live on under £60 per week. An effective 1% cut for those on benefits could mean losing their home or relying on food banks (the only growth area in our economy at the moment); whereas for a medium-salary public sector worker, it would be temporarily tough and seem unfair, but it would not actually be unfair because it would not be potentially devastating.

There are two ways in which we can make this gap wider, meaning that working people no longer feel they are the ones getting the unfair deal: either cut benefits, making the already vulnerable destitute and workers on tax credits further undermined; or raise wages, meaning that hardworking people get what they deserve and the few people on benefits who don’t already may think, ‘I want a piece of that’. A national living wage will not cause inflation in the way that wacky wage demands fuelled inflation started by the oil shocks in the 1970s, because instead of rising and rising exponentially at different rates in different industries, they will steadily rise for everyone. The Conservatives warned the National Minimum Wage would lead to runaway inflation – it didn’t. They also tried to strike fear into us by predicting hundreds of small businesses would go bust, leading to a recession – they didn’t. Ten years later, thirty years of neo-liberalism took care of that for us.

Therefore we wouldn’t be having this pernicious debate this week if union power had not been fatally undermined, and if wages had been supported and lifted – rather than subsidised through working tax credits – by successive governments desperately afraid of inflation and upsetting business. Any money saved by replacing tax credits with a statutory living wage could be used to help those small businesses struggling to pay them out; although this may not be necessary once workers on decent incomes have disposable income and spending power again. The decline in real wages over recent decades has not only been a symptom of Thatcherite economic policies the Coalition are pursuing with abandon, it has also been a symptom of a declining nation economically. However we could have prevented the desperation and poverty now about to affect those on benefits, in work and out, if we had pursued a living wage more vigorously. With the dole currently £56.25 a week, and a full-time living wage nearer £270 a week, there would be a clear and large difference in income between those in work and those out of work. There are myths being bandied around by the government about those on benefits, but at least the small minority who are happily living a life on benefits will see a clear incentive to look for work there, while those working hard already will be able to have a reasonable standard of living for a rich country.

The Coalition is not only dangerous with its rhetoric on benefits, it is wrong; Labour in response is half-right but has come up with the wrong answers when it matters. The causes of the debate this week over the uprating (or not) of benefits in the same year millionaires receive a tax cut go right back to stubbornly low wages and smothered union power. A living wage would render this toxic debate redundant.

By Luke Jones

Share on Facebook
Share on Twitter
Please reload

Want to respond? Submit an article.

SUPPORT BACKBENCH

We provide a space for reasoned arguments and constructive disagreements.

Help to improve the quality of political debate – support our work today.