Employment Opportunities Bill
Debate between Christopher Chope and Gareth Thomas
Mr Chope
The right hon. Gentleman once again demonstrates his bitterness and his socialist credentials. When I introduced the Employment Opportunities Bill in the 2009 Session, I had, by this stage on the Friday morning, been inundated by hostile e-mails from various vested interests in the trade unions. The fact that that has not happened on this occasion shows that there is now a completely different climate of opinion out there, and that the trade unions realise that the minimum wage is of less significance than the fact that too many of their potential fellow workers and, particularly, too many young people do not have jobs. The right hon. Gentleman has failed to catch up with that change in the climate of opinion and the desire of most of us to ensure that we have increased international competitiveness and, as a result, higher standards of living and greater employment.
Mr Thomas
I meant, “I am very grateful to the hon. Gentleman for giving way.” I am sure his time will come again.
Does the hon. Member for Christchurch (Mr Chope) think the climate of opinion has changed among his Front Benchers? Does he think that they will be tempted to support his Bill this morning?
Mr Chope
I doubt it, frankly. I am delighted to see the Minister of State on the Front Bench, but we do not have a Conservative Government, we have a coalition Government, and that is the Achilles heel. In due course we will see that my hon. Friend speaks not from a Conservative party brief but from a coalition Government brief. None the less, I and, I hope, some of my colleagues will be able to speak freely on behalf of the Conservative party.
The hon. Member for Harrow West (Mr Thomas) will recall that back in 1997-98, when his party introduced the minimum wage legislation, the Conservative party strongly opposed it on principle and on the basis that it would prove to be counter-productive and not in the long-term interests of Britain’s competitiveness or, indeed, of people wanting to get into work.
The initial level at which the minimum wage was brought in was so relatively low that it did not bite as acutely as some people had feared it might, but since then the level has risen by the best part of 70%, far ahead of average earnings and of inflation, and as a result it bites a lot more than it used to. That is why I hope that my hon. Friend the Minister and, certainly, my party will look again at the issue and see what is happening in the real world as a result of the minimum wage legislation that we have.
Mr Chope
My hon. Friend makes a really good point. This month we are celebrating 60 years of the UN refugee convention. One of the problems of public perception is that although everybody supports refugees—I think almost everybody would say that we are happy to look after refugees—they do not regard all asylum seekers as genuine refugees. They now think of asylum seekers as what are called illegal or irregular migrants. If we were able to give the genuine asylum seeker enhanced status, as he says, that would raise the esteem in which they are held in this country and their own self-esteem.
I turn now to clause 2. You will know, Mr Deputy Speaker, that the minimum wage is currently £5.93 an hour for an adult over 21, but this October it will rise to £6.08 an hour for such an adult, to £4.98 for those aged 18 to 20 and to £3.68 for those aged 16 or 17. In addition, for apprentices who are within a particular age range there will be a minimum wage of £2.60 from this October. To illustrate the consequences of my Bill, I will use the October figures rather than the current ones.
Defenders of the minimum wage argue that it represents the minimum living wage, but if so, why do hundreds of thousands of self-employed people work for far less, and why does the state tax the minimum living wage? I am enthusiastic about the coalition Government’s tax policy, which recognises that the minimum wage is so basic that it should not be taxed, but we are a long way from that at the moment. From October, the minimum wage for a 40-hour week will amount to £12,646 a year, whereas even the enhanced tax-free allowance for a single person will be £7,475. That means that even somebody on the minimum wage is paying tax on more than £5,000 of their income. In consequence, far from actually receiving a minimum wage of £6.08, the amount that people who are working full-time can take home is more like £5.
Mr Chope
My own view is that the Government got it wrong—I will be blunt about it. There is no point in beating about the bush. I know that I am supported in that opinion by a lot of other commentators. I will discuss later one comment on the increase of 2.5% for adults and an even smaller percentage for young people, which is that it will be disastrous for young people. If that modest increase in the minimum wage is going to make an enormous difference to young people, what would be the consequences of introducing the flexibility in my Bill? It would be nirvana for young people who do not currently have work and are seeking it. We need to consider the matter in context, and I think there is a much bigger issue than whether the minimum wage should be raised by 2.5%, as it has been this year.
Raising the personal allowance will do a lot more to help people on the minimum wage than the 2.5% increase. The effect of the interaction between the minimum wage and income tax is that about 8% of the income of somebody working on the minimum wage will be taken in tax, plus what is taken in national insurance contributions.
If a single adult is out of work, he is entitled to an out-of-work benefit payment of between £60 and £70 a week—well below £2 an hour, even for a 35-hour week. However, the minimum that he can be paid if he works for 35 hours is more than £200 a week. That is a big gap. If he is offered, and willing to take, 35 hours’ work for, say, £140 a week, which is twice what he can get on the dole, the state does not allow him to take it despite the fact that it would save the state a significant amount of money. I put this to the House and to the Government: how ludicrous, mad and silly is that situation? Why can we not allow somebody who would otherwise try to exist on benefits of between £60 and £70 a week to go out and obtain gainful employment and double his remuneration? Currently, we do not allow that.
The freedom to work for less than the minimum wage would not be attractive to everyone, which is why the Bill does not seek to abolish the minimum wage but to facilitate an opt-out by mutual consent. That freedom would not be attractive to everybody. Some might choose to invest some of their time looking for much better paid work rather than undertaking work below the minimum wage.
Mr Chope
The Bill could make provision for that—I certainly intended to make provision for that, but it is not expressed in the current wording. My hon. Friend makes a good point, because we do not want to introduce more disincentives to opting out of the minimum wage, such as putting people in a position in which they are not entitled to any benefits should their circumstances change.
Another reason why people may not want to opt out of the minimum wage is that unemployment benefit or jobseeker’s allowance provide access to passported benefits—meaning that they bring with them money for dependents and help towards housing costs and so on—so people could be worse off working for less than the minimum wage than if they were on benefits. My question is why should these people not have the freedom to decide for themselves whether or not they wish to work for the minimum wage?
Many self-employed people earn far less than the annualised minimum wage for full-time work, thereby avoiding the constraints of the national minimum wage legislation and fixed penalties. There are fixed penalties, which can run into thousands of pounds, for employers who take people on at below the minimum wage, even if that person wants to work for less than the minimum wage.
Of course, not everybody wants to become self-employed. Another argument that I expressed when the minimum wage legislation was originally before the House in the late 1990s was that it discriminates unfairly and disproportionately against people who are not classified as fully disabled—for the purposes of this argument, I shall describe such people as conscientious plodders. It might take such people a bit longer to do a given bit of work than it would take the average person, but by having a national minimum wage we are putting them at a significant disadvantage, because they might otherwise be able to work longer hours for less money per hour to achieve the same objective. If they did that, they would take pride in being able to work and contribute to our society. I do not have the figures with me, but I believe that the proportion of disabled people who are unable to get a job is rising rapidly. That might well be linked with the advent of the national minimum wage.
What would be the consequences of enabling people to opt out? There are many examples of people who offer work to others, such as window cleaning, gardening and car washing, that is not worth as much as the minimum wage. I am not talking only about what we used to know as boy scouts’ bob-a-job week jobs—it is probably more than a bob a job these days. Many people would be willing to offer something less than the minimum wage for a job, but they are currently not allowed to do so. If the price is right, a potential employer will be willing to provide work. I am sure that there is a lot of opportunity out there in the marketplace. People would offer work to people if the wage demanded were not as high as it is currently under the minimum wage. That is particularly true in the more remote regions of the country.
Mr Thomas
I am grateful to the hon. Gentleman for being so generous in giving way. As part of his preparations for today’s debate, has he had the opportunity to study a paper published by the National Institute of Economic and Social Research that suggests that the minimum wage has helped to increase rather than reduce employment?
Mr Chope
I did come across a document that seemed to say just that, but I am not sure whether it was the one to which the hon. Gentleman refers. I read it, but I was not convinced. Indeed, I shall refer in due course to an article that I believe is much more in tune with my views on this matter. It is interesting that he refers to documents from that body, which includes in its title the words “social research”. If anybody should examine this issue, I would have thought it should be the Low Pay Commission and objective, independent commentators.
Mr Chope
That is happening in the real world anyway. Employers in the black economy do not pay tax or national insurance, or offer basic health and safety protection, but they compete with employers such as the ones to which the hon. Gentleman refers.
Let us consider my situation. In the House of Commons, I happen to employ a researcher/intern and pay them more than the national minimum wage, but I do not feel that I am at a competitive disadvantage compared with those colleagues who pay interns nothing or significantly less than the national minimum wage. If employers in the hon. Gentleman’s constituency have good quality employees and look after them well and reward them appropriately, all other things being equal, they can prosper in the marketplace. Currently, many jobs go to countries in the third world that do not have minimum wages or wages anything like as high as we have. However, if we are to provide good-quality jobs in this country, we need the freedom to allow people to compete, and we need to allow people the freedom to work and reach an arrangement with their employer, if they want to.
Let us imagine that one of the constituency firms to which the hon. Member for Midlothian (Mr Hamilton) referred was up against it, had had a big drop in its order book, was facing problems with the bank and all the rest of it. If these people were on the minimum wage and the employer went to them and said, “Look chaps, we’ve got this financial crisis in the company, so we need to come to an agreement whereby we all reduce our wages and salaries if we are to get through this crisis”, that would not be allowed to happen. How inflexible and absurd is that? I hope that the hon. Gentleman will consider this issue in a different light following this debate, and discuss these important issues with employers in his constituency and, more importantly perhaps, people in his constituency who are currently not working but willing to work for less than the minimum wage, if allowed to do so.
The right to work covers not only remuneration, but how many hours are worked. I will not go into this, but obviously there are considerable worries about restrictions on the ability to opt out of the 48-hour working week. That brings me on to clause 3, which incorporates the training wage into the Bill. I am sure that I speak for many colleagues in saying that I could fill my office with unpaid volunteers and interns. Large numbers of organisations now rely on getting young people into their workplaces for no remuneration at all, even when they have to work in London. That is grossly unfair, but one of the reasons it is happening is that there is no flexibility for such people to be paid something between zero and a national minimum wage. If a person is inexperienced and lacking in qualifications, they will obviously be at a disadvantage in the labour market compared with somebody who has got experience and better qualifications. We should be encouraging, facilitating, enabling these people to join the labour market, rather than acting to exclude them.
That is particularly the case for young people. Record and rising numbers of young people are out of work. There was a blip in the figures published this week, but the trend is unmistakable—the number of people between 18 and 24 who are out of work is rising exponentially. Figures for my constituency show that in the period up to May the number of under-24s out of work was rising, whereas the numbers for those in the older age groups were falling.
Mr Thomas
I rise to enable the hon. Gentleman to find the figures from Christchurch, and gently to make the point that perhaps abolition of the future jobs fund, which I think he supported, might not have been such a good idea after all. May I draw his attention to clause 3(2), in which he talks about an
“entitlement to training from the employer in skills relevant to the employment”?
There is no sense in the clause of a quality threshold for that training. Is that not a further reason for the scepticism of those in the House and outside who worry that this part of the Bill would also undercut the minimum wage and allow, as my hon. Friend the Member for Midlothian (Mr Hamilton) hinted at just now, rogue employers to undercut the quality jobs offered by the many, many good businesses in this country?
Mr Chope
I am grateful to the hon. Gentleman for intervening, and I will return shortly to the figures I have now been able to find as a result of his intervention. On the training wage, I am disappointed by his intervention because it shows that he is trying to be pedantic. He is not sure whether under the contract of employment entered into voluntarily between the employer and the trainee—for want of a better expression—the training would be of a sufficient quality. However, that would be a matter between the person being trained and the employer. If that is the hon. Gentleman's only objection, I would be happy to see what could be done in Committee, but I suspect that his objection is much more fundamental, because he is on the side of producer interests backed up by the trade unions. He is not really interested in having a genuine training wage, which is what I suggest we should promote through the Bill. I do not want to appear too sceptical or cynical about what his interventions are really motivated by.
According to statistics from the House of Commons Library, in my constituency in April 2011, there were 205 jobseeker’s allowance claimants under the age of 24, which was an increase of 2.5% over the year. For those between 25 and 49, there was a reduction of 375, which was a 22.7% reduction, and for those aged 50 and over, the numbers were 150 and a 30% reduction. Those figures speak for themselves—they show that we have a real problem. While the numbers of people receiving jobseeker’s allowance in the older age groups are declining—certainly in my constituency—the same is far from true for those in the younger age range. A rational body deciding on policy would say, “There’s a problem here. We have to try and address it.” I hope, therefore, that my hon. Friend the Minister will tell us when he winds up the debate what the Government are going to do to get more young people trained and back into work, if they are not going to adopt my suggestion in clause 3.
Mr Chope
I am sure that the powers that be in IPSA will be listening to every word my hon. Friend says. I agree with him. This, again, is one of the problems with having centralised bureaucracy intervening in the marketplace. Perhaps if clause 3 was on the statute book, it would provide a complete answer to the problem he has identified.
I was talking to a colleague yesterday who said that his son, a recent university graduate, was out of work. At the moment, about 20% of graduates are unemployed. That does not mean that they are unemployable—most of them want to get a leg up into the workplace, but at the moment they are being deprived of that. I had a case in my constituency of a graduate, aged about 24 or 25, who said that he would be happy to work for the so-called apprenticeships minimum wage—it will be £2.60 from October—but he is not allowed to do so because it applies only to people aged 18 or 19. That, too, is a real issue.
I promised earlier that I would refer to Mr David Frost of the British Chambers of Commerce, who said:
“The change to the national minimum wage rate is the wrong increase at the wrong time and will risk pricing young people out of work when youth unemployment is at a record high”.
As I pointed out earlier, if he thinks that a 6p an hour increase in the minimum wage for young people will break the bank, would not completely removing the constraints of the national minimum wage from young people undertaking training have an even greater impact? That is not always the case, but I do not go as far as Eamonn Butler from the Adam Smith Institute, a good friend of mine, who on 17 February called for the minimum wage for young people to be totally scrapped. He set out some cogent arguments and said that the minimum wage
“prices them out of jobs, so does them no good at all. For them, low-paid work is a way of building up some human capital that will make it easier to find a better job. But we stop them even getting that work at all—and all in the name of protecting workers.”
I very much agree with those sentiments.
The last part of my Bill deals with the need to ensure flexibility in the labour market in different parts of the country and sets out a method by which the Low Pay Commission will be required to address those problems.
I hope that this Bill will command the support of the House. However, I hope also that it will trigger a much more serious debate than we have had so far across the Chamber, among my political party, the coalition Government and the Opposition, because this issue is far too serious to be the subject of yah-boo politics—“Are you in favour of the minimum wage or are you against it?” We need to examine the issues in a rational, non-prejudiced and hard-headed way, so that we can get more people back into jobs and enable our economy to prosper.
Mr Thomas
I am grateful to the hon. Gentleman for giving way, as he is clearly winding up to his summary and peroration. With all due respect to him, he has a tendency to march his troops up the hill on a Friday, only to march them straight back down just a little bit later. If those on the Government Front Bench do not share his analysis, will he force a vote on the Bill, or will he once again march his troops back down the hill?
Mr Chope
The hon. Gentleman is uncharacteristically disparaging, if not insulting. First, I am not aware of having any troops. Secondly, if he is referring to the fact that I withdrew my two earlier Bills—the Training Wage Bill and the Minimum Wage (Amendment) Bill—he makes a fair point. However, I withdrew those Bills from the Order Paper because their provisions are incorporated in the Employment Opportunities Bill word for word. Having the good fortune to have secured a debate that could go on for five hours, I thought it better to have one, proper debate, rather than three separate debates. If it is the hon. Gentleman’s accusation that I withdrew those two Bills so that they could be incorporated into this Bill, I plead guilty.
So far as forecasting what will happen after the Minister has spoken, I cannot do that. When the Whips ask, “How will you be voting?”, I always say, “I’m going to wait and hear what the Minister says,” because I have an open mind on these issues. The Minister may well announce that he will support my Bill. Indeed, I had the wind taken out of my sails last Friday when a Minister said just that, and my Bill was unopposed on Second Reading.
Mr Chope
I am disappointed about that, because it sounds as though my hon. Friend may have come to the Chamber with his hands tied—perhaps by the coalition strings—and unable to address the arguments that have been deployed. Perhaps he will tell us a little more about that in due course.
Mr Thomas
I am grateful to my hon. Friend for adding further light to the debate.
The enthusiasm of the hon. Member for Shipley for figures encourages me to set out that in London, some 80,000 people benefit from the minimum wage. I have given a series of examples that give a sense of the sheer scale of the benefit that it has brought our country.
Mr Chope
The hon. Gentleman talks about people who benefit from the national minimum wage, but I presume that what he means is that they are being paid no more than the national minimum wage. That is not to suggest that they would be any worse off without it. He is not suggesting that, is he?
Mr Thomas
I am simply setting out how many people receive the minimum wage. I will explain later the previous low rates of pay and the significance of the minimum wage.
I understand that there remains a significant problem of underpayment of the national minimum wage. The hon. Gentleman and the hon. Member for Northampton South alluded to that in their reference to the black economy. There is a real need for a continued effort to ensure proper enforcement of the minimum wage legislation. I hope that the Minister will explain how the Government intend to tackle that.
I worry that allowing employers to drop the requirement to adopt completely the minimum wage will begin to have another impact on the public purse, because the Government and the taxpayer will have to help, through the benefit and tax credits system, even more than they currently do those on poverty wages. One must ask why the taxpayer or indeed parents, as my hon. Friend the Member for Manchester Central alluded to in a sedentary intervention, must pick up the tab more than they do for the actions of rogue employers, as egged on by Government Members.
Where is the evidence that there would be a significant increase in employment if the Bill became law? In its most recent report, the Low Pay Commission says, and I paraphrase, that the evidence suggests that the minimum wage has not cut employment to any significant degree. The commission also argues that although the number of jobs overall in the economy has continued to fall, the number of jobs in low-paying sectors has increased since the end of the recession. There is therefore no significant evidence to suggest either that the minimum wage has led to job cuts or that economic recovery is being held back by the continued existence of the national minimum wage.
Undermining the national minimum wage would also have an impact on inequality in this country. We face continuing challenges to reducing inequality, and reducing the pay for the very poorest would only exacerbate inequality. Surely nobody in the House wants that.
In preparation for this debate, I read the report of the Second Reading debate on the National Minimum Wage Bill from back in December 1997. The then Secretary of State, my right hon. Friend the Member for Derby South (Margaret Beckett), highlighted the impact that the abolition of wages councils had had on jobs in the 1990s. The right hon. and learned Member for Rushcliffe (Mr Clarke), who was then probably strongly supported by the right wing of the Conservative party—he probably is not now—had originally explained, when he was a member of the Government of the noble Baroness Thatcher, that they abolished wages councils to create employment opportunities, especially for young people and, in his words, to create an
“efficient labour market, where there are the minimum of constraints on the rights of employers and employees to agree to offer and accept jobs on contractual terms that suit them both.”—[Official Report, 11 February 1986; Vol. 796, c. 91.]
In the December 1997 debate, my right hon. Friend said:
“Abolition of the councils…saw earnings in those industries covered, particularly for the new entrants, fall in real terms. But employment in those sectors did not increase relative to the rest of industry.”—[Official Report, 16 December 1997; Vol. 303, c. 164.]
The evidence from that period fits with more recent evidence that confirms that the national minimum wage has helped to increase employment. I referred in an intervention on the hon. Member for Christchurch to a paper published by the National Institute of Economic and Social Research, “The UK Minimum Wage at Age 22”, which was authored by Richard Dickens, Rebecca Riley and David Wilkinson. The paper examines the effect of the increase in the minimum wage at age 22 and various labour market outcomes. The conclusion is that there was a 2% to 4% increase in the employment rate of low-skilled individuals, and that unemployment had declined, in particular among men.
Before the introduction of the national minimum wage, there were many horror stories about low pay. Before 1997, the low pay unit found an example of someone working in a chip shop in Birmingham and taking home just 80p an hour. It also found a factory worker earning some £1.22 an hour and a residential home worker earning just £1.66 an hour. I ask the Government Members who are championing the Bill this question: do we really want a return to those days, because that would be the impact of the Bill?
Mr Thomas
With all due respect to the hon. Gentleman, the situation is as my hon. Friend the Member for Manchester Central set out: by definition there is an inequality in the relationship between the employer and the employee, and a rogue employer wanting to take advantage of that inequality could force wages down, undercutting the wages paid by reputable—and the vast majority are reputable—businesses in this country that want to adhere to the national minimum wage.
By the time it was introduced, the national minimum wage had considerable employer support. Indeed, just before the 1997 general election, the private company DHL carried out a survey among UK exporters, almost 70% of which were either not opposed to, or directly supportive of, a national minimum wage. The case for a national minimum wage is not just a moral argument; it is not just an argument for social justice or greater equality; it is also an economic argument. Companies that can compete internationally only on the basis of quality almost always need a secure domestic base too. The small minority of rogue businesses that undercut that domestic market share of the mainstream business community undermine the latter’s ability to secure a share of the domestic market that enables it to compete on the quality that is essential to win orders in the international marketplace. Far from being a hindrance to businesses, therefore, the national minimum wage helps to ensure that employers wanting to export overseas are not undercut by other employers offering lower wages in the domestic market.
The idea that the national minimum wage is holding back employment in this country is as true as the nonsensical idea that Britain is, or was ever, in a similar economic position to Greece. That argument and those advanced today are like Don Quixote tilting at windmills. The truth is that the real danger to employment in this country are the Chancellor of the Exchequer’s economic policies—creating, as they are, a vicious circle in our economy, because of his decision to cut public spending too hard and too fast. The cuts are hitting families and those on low incomes, and leading to more jobs being axed than is necessary. The county desperately needs a sensible plan B to encourage growth. That is the way to help the unemployed, not this piece of legislation.