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Ed Miliband's Big Minimum Wage Pay Rise Is Actually Pretty Small

£8 per hour wouldn't be much today, let alone in 2020.

by Aaron Bastani
22 September 2014, 5:00am

Ed Miliband (Photo via)

Ahead of the Labour's annual conference this week, Ed Miliband announced what The Observer called a "big pay rise for Britain's poorest workers". Sounds good right? Well don't your smash your Tupperware in celebration - minimum wage workers aren't about to join the halcyon ranks of the Pret a Manger classes just yet. The Labour leader said that if his party win the next election, he'll raise the national minimum wage to £8 per hour by 2020. That means a not particularly huge rise of £1.50 over the five years of any prospective Labour government.

In an interview with The Observer only twelve hours after the results of the Scottish independence referendum had been announced, Miliband spoke of how he thought the vibrant "Yes" campaign demonstrated a thirst for change - and not just a change of flags and constitutions, and not just in Scotland.

When you look at the breakdown of who voted "Yes" it is easy to see why. While the party which was at the front and centre of the "Yes" campaign - the SNP - is a "pro-enterprise", centrist party, many of those who voted for independence on Thursday did so out of the belief that an independent Scotland would mean a shot at a different kind of economic and social model from the one that has prevailed in the UK since the 1970s. To put it bluntly, the young, poor and unemployed were more likely to vote "yes" to independence, presumably because they didn't want to be so hopeless and poor anymore.

The response of Miliband in the aftermath of all this is to emphasise Labour's "solutions" on low pay, as well as the need for major constitutional reform. It's unsurprising, but just how big a deal is the proposed increase in the minimum wage?

First things first, even if Miliband's increase was to be implemented tomorrow it wouldn't be enough. According to the Greater London Authority, an hourly wage of £8.80 is necessary for a full-time worker to meet their most basic needs to live in the capital. The Living Wage Foundation has calculated that a figure of around £7.65 holds true for the rest of the country. If the minimum wage was increased to £8 an hour right now, it would still be inadequate for someone working full-time in the capital who didn't want to live in official poverty. For the rest of the country it would be marginally more than a poverty wage.

A pro-Independence campaigner hating on Labour in Glasgow (Photo by James Turner)

Soon after the policy was made public, columnist and Labour member Owen Jones tweeted his dissatisfaction, "£8 an hour by 2020 is not good enough. At all. A poverty wage that has to be subsidised by the state to make it even possible to live on". Elsewhere the "Artist Taxi Driver" vlogger, Mark Macgowan, gave his own assessment of the proposal: "A 25 pence a year payrise...what can you buy for twenty-five pence? You can't even buy a packet of crisps for 25 pence. What can you buy for 25 pence? A Freddo, a Freddo, a fucking Freddo."

But despite Miliband's attempts to look like a man of the people in contrast to an out of touch government, and the apparent horror of some business leaders, what he's proposing isn't that much different to what's soon to happen anyway. The national minimum wage is scheduled to increase by 19 pence this October. What is on offer from Miliband to "make the country work for working people" is therefore a wage increase of six pence an hour more than what the present government - the nasty Con-Dems - are already presiding over. The real difference between the Tories and the Labour party here isn't a Freddo, as McGowan puts it, but a couple of Winegums. A couple of fucking Winegums.

A bit of perspective: the median wage in the UK - the wage that half of Brits earn less than and half earn more than - is probably the best way of understanding the average person's hourly income. It currently stands at £11.56. Under Labour's proposals, a "key plank of its manifesto for government", the minimum wage would go from 54 percent to 58 percent of that figure by 2020 and 60 percent five years later. No danger of a catchy populist slogan there then. What it means it that what sounds like a pay rise of almost 20 percent will, in fact, be much less impressive when you take inflation into account. It will be more like a six percent rise in the earnings of the poorest people by 2025. The context is that real pay has been falling consistently since 2010 -  the longest period since records began 50 years ago. So this would be a little bump after a long, painful decline.

On the first day of the Green Party conference earlier this month, leader Natalie Bennett called for an immediate increase in the minimum wage to the same level as that of the national living wage outside London - £7.65. As well as that she called for an increase in the minimum wage to £10 an hour by 2020 and for subsequent increases in the minimum wage to keep up with price-rises. While that is a bigger shout than what is on offer from Ed Miliband, it's still relatively uninspiring. And the promise of "by 2020" isn't going to do a while lot for people who are, in 2014, used to being jilted by cash machines the week before pay-day. It's probably not going to capture their imagination less than a year before an election either - "Vote for me and in a mere five years you will be less poor!"

For real inspiration it is probably best to look over the pond to Seattle and the recently successful campaign for a $15 minimum wage (£9.21). Initially that demand, representing a 64 percent pay hike to more than twice the federal minimum wage of $7.25 an hour, looked almost outrageous. Yet little more than a year after the campaign had begun, the Seattle city council unanimously approved the first $15 minimum wage in the country. 

The Green Party are right, we should be asking for £10 an hour, but now - not in six years time. The longer-term ambition should be for the minimum wage to be on a par with the average hourly income, not 60 percent of it as Miliband proposes. That would mean a minimum wage of around £12 an hour. The very least should see it being pegged to inflation. You might think someone who had been labelled "Red Ed" by the Mail would believe in reducing income inequality, in which case he could even peg it slightly above inflation. That might sound crazy but so did a $15 an hour wage in Seattle a few years ago.

What Ed Miliband proposed yesterday doesn't even make a scratch on the number of people who are in poverty despite being in work. If people are paid like crap, then they're going to have to claim benefits to live. Miliband has said he wants to cut benefits but he won't make companies pay people properly.

Much like its constitution, the UK's economic model is absolutely knackered. After nearly five years of wages going into reverse, it's astonishing for so little to be on offer. To change that we'll need to do more than tick a box next May, we'll need to have a movement as dynamic and inspiring as the one in Seattle. You never know, it might already have started in the squares, pubs and community centres of Glasgow and Dundee.

@AaronBastani

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