Brian Binley
Main Page: Brian Binley (Conservative - Northampton South)Employment Opportunities Bill
Brian Binley Excerpts
Mr Brian Binley (Northampton South) (Con)
My hon. Friend is as eloquent as ever, although I hope he will speed up a little in order to allow me to deal with my Bill
Is my hon. Friend going to talk about the black economy? One problem with the employment law he is talking about is that it enlarges the black economy. There is certainly evidence of that in Greece, and from my experience there is evidence of it in Northampton, too.
Mr Chope
My hon. Friend is absolutely right about the black economy, and indeed I will refer to it in due course. The Low Pay Commission itself accepts that there are more than 1 million operating in the black economy at below the national minimum wage. That demonstrates that the minimum wage legislation is not working anyway and is widely ignored.
Tony Lloyd
No. If that is what the hon. Member for Christchurch is proposing, I have absolutely no sympathy with that view. The reason for having a floor is the ambition to prevent the undercutting of wage rates for individuals, whether they are born nationals, as the hon. Gentleman would have it, or asylum seekers. The suggestion that the hon. Member for Bury North (Mr Nuttall) has just made lacks merit because it would erode the whole concept of a minimum floor below which people ought not to be expected to fall.
I want to deal with the argument put forward by a number of Conservative Members that it is legitimate to do away with that floor. They have cited reasons of competitive pressure and the black economy, to which the hon. Member for Northampton South (Mr Binley) referred. Of course we know that the black economy exists and that it exerts a dangerous influence at the bottom end of the labour market, but we do not want to make it a model for how we deal with the whole economy. We should be seeking to get rid of the black economy, rather than institutionalising it by getting rid of social protection relating to wage rates.
That same black economy erodes health and safety standards at work. In my somewhat distant youth, I worked for companies that thought health and safety was an optional extra, and that put my life and those of other employees seriously at risk. The minimum wage and health and safety legislation all form part of the same debate, which we have had many times. I know that different views exist, but I believe in a proper floor below which people in a decent society should not be allowed to fall.
Mr Binley
Does not the hon. Gentleman recognise that most employers want good employees? If they want good employees, they have to look after them. The great majority of employers in this country, certainly in the small and medium-sized enterprise sector, think in that way. The suggestion that all employers are evil, which seems to be emanating from the hon. Gentleman, is absolute nonsense. Will he admit that?
Tony Lloyd
I do not have to admit that, because I have not indicated that that is what I believe. Of course there are many good employers, and they should not be forced to face competitive pressures from the unscrupulous ones who would undercut them. That is the reality in the black economy; it would also be the reality if we had a differential or arbitrary minimum wage rate. That would result in the good employer who wanted to pay his or her employees a decent wage being undercut in the marketplace by the rogue employer. Of course I am not claiming that rogue employers are in the majority, but, sadly, they exist in many different areas of our national life. That is why we have to have floors through which people must not fall.
The hon. Member for Shipley asked me about unemployment rates. I cannot quote him the figures, but I am sure that when he makes his own speech, he will probably have them to hand. Let me tell him something that I know he will disagree with profoundly: nobody has demonstrated any link between the levels of unemployment in our society and the introduction of the national minimum wage. The last person who I think tried to put that concept forward was the former Member for Folkestone and Hythe and sometime leader of the Conservative party—perhaps I should call him the noble Lord Howard. He once claimed in a debate about the minimum wage that it would see the loss of 500,000 jobs, only to claim later that it would result in 1 million or 2 million job losses. When it was brought in, in 1999, we did not see that impact on employment; indeed, we saw employment levels rising.
Tony Lloyd
To be totally frank with my hon. Friend, I do not remember that, but I am very grateful to him for reminding me. He makes a very important point. The idea that the minimum wage is some kind of creation by the ultra-left or the most luddite of trade unions is ridiculous. The minimum wage has had support and continues to have support across a whole range of different groups in our society, including groups representing small businesses. The Low Pay Commission comprises people not just from one side of the employment divide; employers are represented on it and they play a constructive part. As Conservative Members will know, those employers have been supportive of the changes in the level of the minimum wage over time.
Mr Binley
I recognise the hon. Gentleman’s great experience in these matters. He will remember—I believe this to be true—that the Federation of Small Businesses did not come to that position until after the will of the Government had been made absolutely clear, when it became politic from its perspective to adopt it. Is that not the truth of the matter?
Tony Lloyd
I am in some difficulty there in that having admitted that I did not remember the FSB making the decision in the first place, I am reluctant to claim that I know how it made that decision.
Let me use the hon. Gentleman’s point as an important example. He is describing circumstances where groups of people can be coerced by political pressure into making a decision that runs counter to their own best interests. That is the line of argument he adopts about the FSB—that it was dragooned by greater power into making that decision. Is that not precisely the problem with what the hon. Member for Christchurch wants in the workplace? Cannot unscrupulous employers say to weak individual employees—people weak in the sense of their bargaining position relative to their employer—something like, “I, your employer, want to persuade you that it is in your interest to drop your wages below the minimum wage”? It is very difficult to accept that as a legitimate element in the Bill, as we know that unscrupulous employers do that to their employees. I think the hon. Member for Christchurch referred to “the regular plodders” or used some term like that. Some people in our society do have genuine social difficulties in negotiating their wages and they need our protection; they do not want us to take away the minimum floors that protect their wage rates.
Mr Binley
I thank the hon. Gentleman again for being generous in giving way, but is he not perverting the meaning of the clause, which makes it quite clear that this happens only when an employee, not an employer, wants to argue for a lower wage. Is that not the truth of the matter? Is the hon. Gentleman saying that unscrupulous employers throughout the nation will go out to their employees and in some way victimise them and force them to argue for that? Is that what he expects us to believe?
Tony Lloyd
I do not know what the hon. Gentleman believes as it can be quite difficult to work it out, but I suspect that we do not have much in common on these issues. Yes, I do think there is a real danger of that. I know it, as I have worked for employers who were extremely dubious in their labour practices. I know that when people are young and inexperienced and they need the work, it is difficult for them to say to an employer, “No, I will not do that.” The hon. Gentleman might be surprised to find out that that is why trade unions grew up—because people needed collective protection. It is why trade unions and political parties like the Labour party campaigned for a national minimum wage—because people at the margins in our economy need that collective support, through collective action or by legal support. Indeed, it is why the Government Front-Bench team has been persuaded of the need for a national minimum wage. If the Government did not believe in the need for a basic floor below which people cannot fall, they would not have opposed the Bill and supported the national minimum wage.
There is a gulf in understanding of how the world of work works between the hon. Member for Northampton South and myself—and ever may it remain thus, as our experience might have been different. Perhaps he has met only benign and happy employers—I am sure he was one of them—but I have met some quite malign and quite nasty employers. One day, I will perhaps buy the hon. Gentleman a half pint of our subsidised beer and tell him all about it.
Mr Binley
I look forward to that and thank him for the half pint. Does the hon. Gentleman not recognise, however, that unless an employer has working people who want to do the job and want to be involved, he will not get the sort of work out of them that he clearly needs—especially in the SME sector?
Tony Lloyd
The hon. Gentleman rightly pushes me to refer to some of the realities. Let us go back to the time before the national minimum wage. Let us go back to a time when young hairdressers in cities like Manchester were being paid under £1 an hour. Why did they take that work? Because they were young people who felt that they had to buy into the workplace. They had to accept way below any acceptable level of remuneration and way below an income that anyone could seriously live on in the hope that it would give them the experience to carry on in the trade. That was wrong then and it would be wrong if we were to bring it back again. That is the reality of what the Bill would do. It would take the clock back to a time when bad employers were prepared to compete unscrupulously against the better employers at the expense of their employees.
I am totally on board with the hon. Member for Northampton South in advocating the point that good employers work well with their employees. In many cases, good employers train, pay reasonably and provide acceptable working conditions. I have worked for good employers: but not all employers are good; not all employers are acceptable; not all employers operate proper health and safety standards; not all employers offer an acceptable wage for people to live on. That is why we have a floor through which people should not fall.
Mr Deputy Speaker (Mr Lindsay Hoyle)
I have no knowledge of a statement to the House being prepared; I have not been given notice of that. As the hon. Gentleman knows, it is not for me to ensure such a statement is given; that is up to the Government.
Mr Binley
Further to that point of order, Mr Deputy Speaker. We may be in a very serious crisis indeed. Greece is no doubt bankrupt. In addition to our international obligations, our banks are owed tens of billions of pounds, and that will impact massively on Britain’s own financial standing. How can we use our abilities through you, Mr Deputy Speaker, to ensure there is a statement not later than Monday of next week?
Mr Deputy Speaker
The hon. Gentleman knows that that is not a point of order and it is not a matter for the Chair, but I am sure people in high office are listening, and that his comments will have been taken on board.
Mr David Nuttall (Bury North) (Con)
It is a great pleasure to follow my hon. Friend the Member for Wellingborough (Mr Bone) and I thank him for the sound comments he made; and I congratulate my hon. Friend the Member for Christchurch (Mr Chope) on bringing the Bill before us. I am conscious that time is marching on and that other Members wish to speak before we hear from the Minister. I shall not, therefore, reiterate the sensible and sound arguments made in support of this Bill, which I, too, am proud to support. However, one or two points have not been mentioned, so it might be of benefit to everyone if I highlighted them.
First, let me say at the outset that my support is based on my desire to do all I can to help those people in my constituency—people in Bury, Tottington and Ramsbottom—who are unemployed. The latest figures from the Library on the number of people claiming jobseeker’s allowance in my constituency as of May 2011 show that 625 such claimants are aged 24 or under; 1,055 are between 25 and 49; and 280 are aged 50 and over—totalling 1,960, which is nearly 2,000 people. Those are the people I want to help.
The great benefit that would accrue if the Bill reached the statute book is that we could make the rights of those people a reality. I mean the basic human right contained, as my hon. Friend the Member for Christchurch said, in article 23(1) of the universal declaration of human rights—that everyone has the right to work. The minimum wage legislation, however, removed that right to work from certain people, who were told, “We are sorry, but you cannot do what you would like to do. We have decided for you. We have taken that right away from you. We will tell you whether or not you can choose to work.” That cannot be right.
My hon. Friend the Member for Wellingborough, who is no longer in the Chamber, did not make clear whether he was an employer at the time when the minimum wage was introduced, but I can tell the House that I was. I can speak about the effects of that legislation on the basis of first-hand experience. Credit should be given where it is due: we were given notice, and we knew what was coming down the line. The legislation had been enacted, and we knew that, in time, a national minimum wage would be introduced. So we started to plan, and to assess the likely impact on our business.
Members might assume that it would be a simple matter of having to increase the pay of anyone who was earning less than the minimum wage at the level at which it was introduced back in 1999, and of course that was the first thing that we, as employers, had to do. However, it had a knock-on effect. Ours was a small business employing perhaps 40 people, and the introduction of the minimum wage probably affected two or three of them, although I cannot recall the precise number. They were the office juniors—the staff members who were at the bottom of our pay scales. They might have been with us for only a few weeks or months.
Most of our staff were moved on, and those who started as office juniors knew that they would be able to work their way up and become junior typists, then secretaries, and eventually, perhaps, trainee legal executives. Other staff members, however, had already progressed within the business and were earning what had now become the minimum wage. As soon as the office juniors were moved up, we had to start moving everyone else up. I understand that the process is known as “pay leapfrogging”. All that happened was that everyone was moved up the ladder.
Mr Binley
Another facet of the minimum wage was that it increased at twice the rate of inflation, which had the effect of shoving all wages up. Does my hon. Friend agree that Ministers in the last Government—the present Opposition—worked on behalf of their paymasters, the unions, to achieve that very objective? One wonders where it would have ended in terms of Britain’s competitiveness.
Mr Nuttall
My hon. Friend has made a good point. That was part of the overall effect of the introduction of the national minimum wage, with which I was about to deal. Earlier speakers have said that many employees—especially those at the bottom of the pay scales—benefited from its introduction, but it is sometimes forgotten that, by implication, it must have had an inflationary effect on the economy. Nowadays we are constantly hearing that the increase in the VAT rate has, understandably, had an effect on the inflation figures. Similarly, given that the cost of employing people is the biggest single cost incurred by many businesses—especially in the service sector—the introduction of a national minimum wage is bound to have a serious and significant inflationary effect. Therefore, the overall effect of helping those at the very bottom of the pay scales is perhaps not as great as may sometimes be thought.
We have heard a lot about the arguments for, and logic behind, the national minimum wage, but I submit that they are, in fact, arguments for a national income guarantee, as there would be logic in saying every member of society should have a given minimum level of income. That is not what the national minimum wage does, however. It is entirely different, and therefore in most cases—there are exceptions, one of which I shall touch on shortly—the choice is between a life on benefit and a life in work.
Let us consider the following hypothetical situation. An entrepreneur wants to establish a new restaurant in my constituency. It is a large restaurant with a number of tables, and he wants to employ waiters and waitresses. The restaurant will be open full-time, and he calculates that he can pay a total of £53.37 per hour for his workers. It just so happens that that is nine times the current national minimum wage of £5.93. At present therefore, he would be able to employ nine members of staff. The entrepreneur places an advertisement in the press, and 10 people apply for the jobs—the true figure would probably be much higher, of course. They are all friends who went to school together or met at the local job centre. They are probably some of the 625 people to whom I have referred who are unemployed. They say to the entrepreneur, “This is great. This is just what we would like to do. It is an opportunity for a job. We would all like a job.” The entrepreneur replies, “I’m sorry, but under the current legislation I cannot employ all of you. The best I can do is employ nine of you.” Therefore, the 10th friend is left unemployed and living on benefits, whereas the other nine can get a job earning the minimum wage.
Under the Bill’s provisions however, they would be allowed to say, “Actually, we’ll help our friend out. We want to help our friend No. 10; we want him to have a job. We all voluntarily agree to that. We would still be far better off if we worked for, let’s say, £5.33 an hour, and then all 10 of us will be able to have a job. We’ll all be friends working together. That will be tremendous, and our poor 10th friend will not be left on their own.” Without this Bill’s provisions, the great irony of the existing situation is that the nine would be employed while the 10th could become self-employed and would be entitled to work for less than the minimum wage in any case. That is an anomaly in the current legislation.
Whenever the national minimum wage is discussed and arguments are put for and against it, people always talk about “big businesses” and “rogue employers”, but let us not forget that the national minimum wage applies to all employers, including charities and small organisations in the voluntary sector. They are all affected by the national minimum wage. The Bill is a contribution to the big society, because it would mean that small charities would be able to employ more people, not only the young, but perhaps older people, too—this is not just about people in the under-24 category. My figures show that in my constituency this might apply to 280 people over 50. These people might be able to afford to work for less, perhaps because they have bought their own home and paid off the mortgage, and they may wish to help a local charity. I am talking about self-sufficient people who are not claiming benefits and who want to work for a small local charity. As the law stands, they would not be able to do so. The Bill therefore contributes to another other theme of the big society—that of passing power over.
Mr Leigh
Obviously, if the Bill is allowed to progress to Committee, we will have to tease out some of those points. My hon. Friend the Member for Christchurch accused me of being a paternalist, but there is nothing wrong with thinking like a parent. I suspect that this is a clash between the free market wing and the socially conservative wing of the Conservative party.
The Victorian age has been mentioned. Many Victorian owners were very bad and we can read about them in Dickens’s novels, but many, particularly those inspired by conscience, religious faith and other such factors, were superb employers. There was a big debate about these issues in Victorian times. Without boring the House, I want briefly to allude to a papal encyclical called “Rerum Novarum”, issued in the latter part of the 19th century, which made it absolutely clear that the wage earner is entitled to a just wage and that we cannot live with an untrammelled free market because there is a mismatch in power between employer and employee. These are very important issues that must be addressed by my hon. Friend the Member for Christchurch before the Bill becomes law.
Mr Binley
I find my hon. Friend’s contribution interesting, but will he accept an example of an experience that was brought to me in my constituency? Some people were made redundant through no fault of the owner of the company—the recession smacked him hard. Three of the elder members of the group who wanted to work, for their own esteem and because they felt that working had a greater relevance to their lives than not working, went to him and suggested that they take a cut below the minimum wage for a limited period. He looked into it and found that he could not do that, of course. Is that not a foolish situation when we are trying to encourage people to recognise that work is a valuable part of the human experience?
Mr Leigh
That is an excellent intervention that shows the moral issues in our debate. There will undoubtedly be situations—this is where I agree with my hon. Friend the Member for Christchurch and why I think his Bill deserves to be debated in Committee—involving a perfectly good and caring employer, such as the one described by my hon. Friend the Member for Northampton South (Mr Binley), who is in a difficult situation and employees who are desperate to keep their jobs. We must be aware of that.
There are two other issues that are worth mentioning. The first is the increasing scandal of internships, particularly for young graduates. I feel quite strongly about this matter, which has already been mentioned by my hon. Friend the Member for Wellingborough (Mr Bone). I suppose I should declare an interest as a parent, and two of my children are already graduates. All of us who are parents know that whereas our generation—that of my hon. Friend the Member for Christchurch and myself—left university in times of full employment, young people are increasingly trapped in a disgraceful situation in which employers tell them that they can work for them, but only if they work for nothing. I do not think that that is right.
When I take on an intern in the House of Commons, I pay them the minimum wage. I am firm on that. It is fine if a young person between school and university wants to come here for a week’s work experience and work for nothing, but I am absolutely clear that if someone is working here for six months or so, they should get the minimum wage, and I will not pay any less than that. However, many young people are now trapped.
One advantage of the Bill—it is worth debating further—is the excellent idea of a training wage, which I see as a kind of halfway house. It would enable employers to pay graduates something, although my view is that, if the company involved is in the City, it should pay the minimum wage. It is better if young graduates, having worked so hard to get through university, are not in the dreadful situation of kicking their heels at home or, if they do work, getting nothing for it. We must have a proper debate about the scandal of internships. It is good that my hon. Friend the Member for Christchurch has put that in his Bill. It is a Back-Bench Bill and we all know that in reality it is unlikely to become law. However, we need a fuller debate on that matter.
We also need a fuller debate on clause 1, and my hon. Friend has been honest about that. It deals with a subject we do not hear much about. It is a scandal that in this country large number of foreign nationals—people whose applications for British citizenship are being considered, or asylum seekers—are trapped in the appalling situation of not being able to work. I think that we are a bit dishonest with ourselves about that.
The hon. Member for Harrow West, made the valid point that we should not allow employers to pay less than the minimum wage because all that will happen is that the taxpayer will have to step in through the tax credit system. My hon. Friend the Member for Shipley said that he did not agree with a tax credit system, but that is a bit of a simplistic argument. It is impossible for people with children to raise a family on anything much less than the minimum wage plus some tax credit. My hon. Friend the Member for Bury North (Mr Nuttall) made the point that we should have an honest debate about what basic national benefit should be paid to keep people in body and soul. I have always argued that a universal minimum benefit payment should be available, with a minimum of churning of taxation on top of that, and as flat a tax rate as possible, which would encourage people into employment. The trouble is that so much of our minimum wage-tax credit system does not help the poor. It often traps people in unemployment and dependency and discourages people from going into employment. Those issues need to be debated much more honestly, so I congratulate my hon. Friend the Member for Christchurch on introducing the Bill. It is an interesting Bill that raises issues of great importance, and I hope that it will be allowed into Committee.
The Minister of State, Department for Business, Innovation and Skills (Mr Mark Prisk)
I congratulate my hon. Friend the Member for Christchurch (Mr Chope) on securing parliamentary time for the Bill. I confess that I have not been a regular attender on Fridays and I found this to be—how can I put this nicely?—a different style of debate.
We began with some rather florid language. I think there was talk of gouging and the crushing hand of state socialism by stealth—a particular favourite of mine—which presumably is the opposite of the hand which Adam Smith liked to talk about. Perhaps more predictably, we had some early fireworks from the right hon. Member for Rotherham (Mr MacShane) in response to that. Then there was a wide-ranging debate, ably chaired, Madam Deputy Speaker, by your fellow Deputy Speaker. We visited small business in Wellingborough, asylum seekers in Zimbabwe, and, at one point, the Victorian age, possibly in person, though my hon. Friend the Member for North East Somerset (Jacob Rees-Mogg) is not here now. Two topics which I suspect, although I am happy to be corrected, may be popular on a Friday morning—the EU and IPSA—also seemed able to be drawn into the heart of debate, all within order, of course. There was, just for a moment, the prospect of an unholy alliance between the hon. Member for Manchester Central (Tony Lloyd) and my good friend the hon. Member for Christchurch, but as my hon. Friend rightly concluded, this is an important debate to our constituents, and in many senses too serious for yah-boo politics. I will seek to address the range of issues that have been highlighted during the past three and a half hours.
There are four elements to the Bill. Clause 1 provides that no foreign national lawfully resident in the UK who is above compulsory school age can be prevented from engaging in remunerated employment. The rest of the Bill concentrates on the national minimum wage. Clause 2 provides an opt-out, clause 3 exempts a person who is getting a training wage from the minimum wage, and clauses 4 to 8 provide for the introduction of a regional minimum wage. As the Bill principally concentrates on the national minimum wage, I will discuss those provisions first, but I will address clause 1 as well.
I am pleased that the debate gives me the opportunity to remind hon. Members that the Government are committed to the national minimum wage. We believe that it gives protection to low-income workers and provides incentives to work, and we made that clear in our coalition agreement. As the Under-Secretary of State for Business, Innovation and Skills, the hon. Member for Kingston and Surbiton (Mr Davey), who has responsibility for these matters, made clear, the aim of the national minimum wage is to establish fairness in the workplace and to make sure that work pays. It does that by ensuring that all workers receive at least the hourly minimum rates set. As well as helping workers, the minimum wage also helps business by ensuring that competition is based on the quality of goods and services provided, and not on the lowest price potentially based on exploitative low rates of pay.
Hon. Members will be familiar with the fact—we have talked about it in the debate—that the level of the minimum wage is recommended to the Government by the Low Pay Commission. The commission has widespread support, not just from the trade union movement, but from employers. It is independent of Government and comprises nine commissioners, and the aim is simply stated as to
“have a minimum wage that helps as many low-paid workers as possible without any significant adverse impacts on inflation or employment.”
Those impacts have been raised in the debate, and I will address them specifically because I know that they are of concern to right hon. and hon. Members.
Commissioners receive submissions and take oral evidence from a wide range of representative organisations. They also visit businesses throughout the UK. That puts them in direct contact with businesses in low-paying areas and areas with unemployed and low-paid workers and their representatives, so that they can understand the realities of the circumstances in the workplace. That consultation supplements the commission’s analysis of high quality and extensive research and official data, so the basis of the agreement that commissioners represent to Government is robust evidence. Since the introduction of the national minimum wage, the commission has carefully monitored its impact on the economy in general and the labour market in particular. It looks at a range of issues and variables, including profits, prices, productivity, investment and business creation.
Clause 2 provides that a person who would otherwise qualify for the minimum wage may elect to opt out of such an entitlement. It makes it clear that any such election must be made by an employee in writing to their employer and must be signed by both the employer and the employee. I believe that the proposals in clause 2 are flawed in a number of serious ways. First, they make it easier for workers to be exploited. My hon. Friend the Member for Christchurch stressed that he is talking about arrangements for freely consenting adults, but how will he ensure that that is in fact the case in every place of work? Low-paid workers who may be fearful of losing their jobs are unlikely to have that free choice—that equal position—over whether they should accept a pay cut taking them below the national minimum wage.
Some people might feel that that is far-fetched, but it is worth looking at the first evidence that the Low Pay Commission established. In its June 1998 report, it states:
“Most workers in the UK have seen an increase in their real earnings over the past two decades. But increases have not been uniform. Average earnings have increased much more rapidly than the earnings of lower-paid workers, and the earnings of the skilled have increased relative to those of the unskilled. Certain groups of workers are much more likely to be low paid than others: these include women (particularly those who work part time) as well as young ethnic minority and disabled workers. Temporary workers and male part-time workers are also more likely to experience low pay.”
The report concludes:
“We met many workers who felt trapped on low pay because of lack of skills, mobility or opportunities. They feared that their only alternative was unemployment.”
The commission also found examples of “gross exploitation”. In its report it cited the example of a woman employed in a bar who routinely worked what was described as a “four hour” evening shift for £12 gross. The four hours reflected only the time that she was serving, however; they did not include the requirement for her to spend another two hours after closing in order to clear up the bar. That time was not paid for at all. Those instances do occur, and we need to ensure that when we frame legislation we respect all of them.
There is no guarantee that an employer’s motives for getting a worker to accept pay below the minimum wage will be based on ensuring the business’s survival. That has come out in the debate from a number of contributors, and it goes to the heart of the economic reasons underpinning a national minimum wage. In technical terms, that would be described as monopsonistic competition, but in less technical language it is about market power, and several hon. Members, including the hon. Member for Manchester Central and my hon. Friend the Member for Gainsborough (Mr Leigh), have highlighted that issue.
Vulnerable workers—those with few qualifications, those who are in fact functionally illiterate and those with work-limiting disabilities—do not have equal bargaining power when compared with their employer. There is a mismatch, and there is that risk of exploitation, and the problem with clause 2 is that it does not take account of that potential problem. We believe that it could reinstate the problems that led to the introduction of the minimum wage in the first place.
That is not the only problem, however, important as the issue of vulnerable workers is, because the Bill’s proposals could be bad for business as well. The Low Pay Commission found in its first report that competing simply on the basis of low pay can lead to a damaging downward spiral of low wages and poor standards, which would be bad for businesses and workers. This was recognised by the British Chambers of Commerce, which stated in its evidence to the commission that
“businesses recognise that a low wage policy leads to a vicious circle of low morale, low performance and low productivity”.
It is important to remember that, although the vast majority of employers seek to do the right thing and do the right thing, there will always be that minority, and the danger of shifting away from that is one that affects employers and employees. That is not just my own view, or indeed that of the Government. I am in good company, because Winston Churchill made the point that
“the good employer—
without minimum wage protection—
“will be undercut by the bad, and the bad employer will be undercut by the worst.”
There is also no evidence that the provisions in clause 2 are necessary. I have mentioned what the Low Pay Commission set out, but it is also worth looking briefly at the balanced way in which it has implemented the national minimum wage over its lifetime. I know that there was much discussion about the expectations that were or were not raised prior to the introduction of the minimum wage, but the commission’s approach has been reasonably cautious. It has been cautious in difficult times, but, yes, it has balanced that with more generous rate recommendations in better times.
Mr Binley
Will my hon. Friend help me? I need to understand something, because under the previous Government—it could only have been under the previous Government—the minimum wage increased by twice the rate of inflation. Is that where this Government want to go with the minimum wage, or will it not increase at that rate under my hon. Friend’s jurisdiction?
Mr Prisk
I am saying that the Government will seek from the Low Pay Commission a careful assessment of the market conditions year on year, whether they are good or bad: what is affordable and where the balance can best be struck between ensuring that the minimum wage is reasonable for those who are affected and not having an unreasonable effect on businesses as a whole. The Government cannot set it in advance or seek for it to double.
Mr Binley
Perhaps my hon. Friend can help me further, because he did not answer my question. We all recognise that the double-inflation increase has had the effect of raising wages throughout the system. Given that, does the Minister understand why it is important, particularly at this time, to ensure that the minimum wage does not rise above the rate of inflation?
Mr Prisk
Absolutely; we will be careful to ensure that the recommendations we receive from the Low Pay Commission take that point into account. It should consider not only the conventional measures of inflation, but the costs that affect businesses, who are also the employers. This is a year-on-year process because flexibility is needed as the market changes.
In 1999, the commission set the rate at £3.60 an hour, which was pretty cautious. In the early years of the minimum wage, the commission continued to take that cautious approach. I do not propose to go through each and every year, although it is tempting. Since 1999, we have seen good times and bad, and I think it is worth considering how the commission has responded in those different contexts.
In 2001, the commission recommended that in 2001 and 2002 the adult minimum wage should increase to the level that it would have reached if it had always been raised in line with average earnings. In other words, at the start when things were challenging, the commission did not want to raise it too early. However, as the market improved and became more robust in labour terms, it was able to add to the minimum wage in a way that related to the costs of businesses.
In 2007, the commission came to the conclusion that a more cautious approach was again required. It looked at the pay differentials, particularly in the retail and hospitality sectors, both of which were progressing. That was coupled with concerns about price inflation feeding into wage inflation. The commission reported for the first time that it was concerned that the minimum wage was biting in that way.
In the most recent reports in 2009 and 2011, the commission was clearly dealing with a very different economic environment. By the time of the 2009 report, the UK was clearly in significant economic decline and recession, accompanied by sharp increases in unemployment and a fall in total employment. The decline in economic activity was much sharper than had been anticipated by most economists, never mind those working for the commission. That is why the commission recommended that the adult minimum wage should increase by only 1.2%—much less than in previous years.
The report published in April 2011 reflects the fact that the UK economy is recovering following the recession. The labour market has continued to show the resilience it had in the recession and unemployment remains below the median levels forecast at the time of the 2009 recommendations. The commission concluded that its approach needed to recognise the continued economic uncertainty, while protecting the lowest-paid workers from falling further behind—hence the recommended increase in the adult minimum wage of 2.5% to £6.08, which is broadly in line with average earnings and pay.
Those points in time—1999, 2001, 2007, 2009 and 2011—were all at different points in the economic cycle. The review that I have undertaken in preparing for this debate has demonstrated that the commission has been sensitive to the different market conditions. Sometimes it was able to be more generous and sometimes it had to be more restrictive. That is the right balance.
Many Members have raised the impact of the minimum wage. I will deal first with its impact on earnings and labour costs. Businesses react in different ways to labour costs. If they rise, some businesses absorb them by reducing non-wage benefits or adjusting their pay structures, as we have heard from several hon. Members. However, the employment picture is a little different from the one that has concerned several Members. In fact, I say in particular to my hon. Friend the Member for Shipley (Philip Davies) that since the minimum wage was introduced in April 1999, aggregate employment has grown. Despite the recession, it was still higher last September than it was prior to the introduction of the minimum wage. That occurred through the boom, through the Labour bust and back into the new coalition Government’s recovery. During that period, the number of employee jobs has increased by 1.1 million and the number of employees by 1.4 million. The number of hours worked has increased by 3.1%.
My hon. Friend—I do not see him in his place at the moment, but I will continue my point for the benefit of the House—asked the eminently sensible question whether the impact of the minimum wage on those on lower incomes had been adverse by comparison with the rest of the economy. I have sought the answer to that question. In the same period, from the introduction of the minimum wage in 1999 to the first quarter of 2011, the number of employee jobs in the low-paying sectors has actually increased by 366,000, which is 4.8%.
Mr Prisk
That brings us back to whether it is actually a choice to do so. I totally respect my hon. Friend’s point that there are people on the edge of the labour market who are keen to work. However, if we open up the system and return to competition based on the lowest pay, we will go back to the original problem. I agree that we must ensure that we do not have undue inflexibility in the system, but I believe that returning to the position that the Bill suggests would create more problems than it solved.
Mr Binley
I am most grateful. Does my hon. Friend recognise that most employers, and certainly my company, try very hard to set the wage levels for their low-paid employees above the market rate, to attract the very best labour? That is the major concern of most small and medium-sized enterprises. I recognise that a very few rogue employers would not do that, but does he accept that in the main, companies wish to pay more to attract better labour?
Mr Prisk
Absolutely. The vast majority of decent employers are keen to ensure that they get the brightest and best, and are willing to pay for that. We should not allow any characterisation of employers in this country as always wanting to do down their employees. That is not my experience, and I hope Opposition Members will not tolerate such a characterisation in future.
Clause 3 seeks to exempt a person from the minimum wage as long as they receive a training wage. We have had a constructive discussion on apprenticeships, training and the importance of helping young people, to which the clause is relevant. Ever since the Low Pay Commission’s first report in 1998, it has been argued that young people should be treated differently from their older counterparts. The rationale is that the threat of unemployment because of too-high wages is greater for younger people than it is for older people. Clearly, young people often lack experience in the workplace, and are therefore more likely to be both on lower earnings than older workers, and to work in lower-paying sectors.
Young people are therefore more likely to be more vulnerable in the labour market. We have seen that, sadly, in the last couple of years. If I may say, it is encouraging that since May of last year, there has been an improvement in youth unemployment. I am pleased that I can confirm today that youth unemployment is lower than that which we inherited. I hope that Opposition Members will acknowledge that, because it is an important issue on which we agree.
The current rate for workers aged 16 to 17 is £3.64 an hour, and the rate for those aged 18 to 20 is £4.92 an hour. That contrasts with the adult rate for those aged 21 or above, which is currently £5.93. In recommending minimum wages for young people, the commission aims to ensure that the rates neither provide an incentive for young people to leave education or training—that is an important balancing act—nor harm the employment prospects for those who decide to work. As well as the minimum wage rates for young workers, we last year accepted the commission’s recommendations to end the exemption from the minimum wage for apprentices under the age of 19, or those aged 19 and over in the first year of their apprenticeship.
We have hence introduced a new minimum pay rate for those people within that framework, which has ensured—for the first time, I believe—that all apprentices in the UK get the protection of the minimum wage. It gives them a fair deal, and therefore protects them from exploitation, but it does not deter businesses from taking them on. As we have heard, that apprentice rate is currently £2.50 an hour.