The UK minimum wage - flying at half mast ...

As previously reported on this blog, the UK minimum wage is being cut in real terms this October, and would be 7% higher today if it had increased in line with inflation over the past 5 years.

The infographic below shows just how much the UK minimum wage needs to catch up not only with inflation, but with rates in many other comparable countries.

(We're reliably informed that if the national minimum wage (NMW) had increased at the rate of that for FTSE100 Chief Executives since 1998, it would today stand at more than £19 per hour - equivalent to a full-time salary of £39,000 a year!)


A recently published infographic by the PCS union* shows that the UK NMW lags behind comparative rates in many other nations (though the UK edges the US on 32%).

The graphic also mentions that if our minimum wage was equivalent to that in France, low paid UK workers would be earning an extra £1.95 per hour - equivalent to nearly £4,000 extra a year. (If it rose to New Zealand levels, our NMW would be £9.55 per hour - equivalent to nearly £19,000 a year for full-time work).

For the national minimum wage to reach the UK living wage of £7.45 per hour would mean the NMW being equivalent of 42% of average earnings - the same rate as in Portugal, and just below that in Australia.

It's a commonly made argument that raising the minimum wage would increase unemployment. Indeed that same argument was made the NMW was first introduced. Study after study (including this one from the US) shows that not to be the case - and there are even Tories calling for an increase in the minimum wage.


It's quite clear that the UK's low wage economy is having a drag on demand (one that loosening credit doesn't solve). Indeed, a PCS report published earlier this year - Britain needs a pay rise - showed that the real value of wages has fallen by 7%, there has been a real terms drop in consumer demand of 5% over the same period.

And the misery doesn't end there for low paid UK workers - who are also facing a real terms cut in a range of in-work benefits, including working tax credit and child tax credit - while child benefit is frozen for the third consecutive year.

If you want an economic recovery, you need more £s in people's pockets. If you want more £s in people's pockets, you have to either legislate for a higher minimum wage (as many other nations have done) or restore some trade union rights, so that workers have greater bargaining power to win better pay.

*PCS has a great series of infographics which you can see via the PCS Facebook page

Why trade union rights matter

Tomorrow morning (Fri 22 Oct), John McDonnell will be moving his Lawful Industrial Action Bill, which would tackle the increasing practice by employers of using minor technical errors in the balloting process - which have no material effect on the outcome - to take unions to court in order to prevent them from taking industrial action.

It would mean the repeal of one of the most pernicious pieces of Thatcher's anti-union legislation, just one of many - but it would be a step forward. The Bill itself is sponsored by a dozen Labour MPs, and was unanimously backed at TUC Congress in September.

When we look across the Channel to France, the importance of a fair legislative framework for trade unions is immediate. France has only 8% union membership in its workforce, compared with around 24% here yet their workers and unions are able to take effective action to resist attacks on their living standards.

And it's not just France, in South Africa public sector workers have won a 7.5% pay rise after 3 weeks on strike, with an 800 rand housing allowance thrown in too.

Gone are the days, as many will have seen in Made in Dagenham, when workplace votes could initiate strike action. In fact, it's fair to say the Equal Pay Act would not exist if Thatcher's anti-union laws had been in place.

In the UK the effects of the anti-union laws are clear: the value of wages has declined from nearly 65% of GDP in the mid-1970s to 55% today. Over the same period, the rate of corporate profit has increased from 13% to 21%. A large part of the reason for the global economic crisis, argues Graham Turner in his book, is the global squeeze in wages which has sapped demand out of the economy.

Whether or not John's Bill passes the first hurdle tomorrow - it needs 100 Labour MPs to attend to make sure - UK unions are going to have fight vigorously and innovatively despite the anti-union shackles around them. It's essential they do - people will suffer immensely, and the poorest most, if these cuts go through.

John McDonnell will be presenting his Bill tomorrow in Parliament from 09:30 tomorrow (Fri 22 Oct). You can watch live on the BBC Parliament Channel.

Update, Fri 22 Oct, 2:30pm: Unfortunately only 87 Labour MPs could be bothered to attend the debate and so the Lawful Industrial Action Bill fell. Very disappointing, but well done to all those who lobbied their MPs - and to those MPs who did attend and support the Bill.