There is a consensus in modern Western civilisation, that there should be a minimum wage that anyone can reasonably be expected to work for. Moreover, there is generally a consistency of approach from place to place on how to calculate it. The benchmark is the national average wage. The fraction of that average that is taken as the minimum very much reflects the respective societies. In fairly egalitarian parts of the world, such as North-West Europe and Australasia it is around half, while nations more comfortable with extreme contrasts between rich and poor may set it at a third or a quarter.
Jersey takes a slightly lower fraction than the mainland UK as its chosen level. This is not unreasonable, as the average is not only skewed upwards by the relatively high proportion of well-paid professional jobs, but also inflated by the use of the mathematically inappropriate mean for the official average, instead of the usual median. However, there was a long-term strategy to progressively increase from 40% to 45%. The proposals from Deputies Pitman and Southern previously posted on this blog seek to insert suitable figures into the formula to continue, or at least defend the progress.
Personally, however, I am unconvinced that the methodology really approaches the issue from the right direction. There is a strand of left-wing thought that holds wealth distribution to be an end in itself, but it is too rooted in the primitive psychology of envy to lay credible claim to the moral high ground. Surely, the proper and decent basis of any scheme for minimum incomes is to apply our equally primitive, but far more decent human urge for looking after our weak and needy to the alleviation and preferable elimination of poverty.
The basic costs of an austerely sufficient lifestyle in our local economy are already calculated with some care for the purposes of Income Support and Old Age Pensions. Income Support then provides benefit to make earned income, if any, up to a minimum acceptable for the individual's general circumstances and responsibilities. A single adult will receive £92.12 to live on, for example, plus £106.75 for renting a bedsit. A total of £198.87 is therefore reckoned to be the bare minimum for independent existence without undue poverty, at current local cost of living.
Guaranteeing that minimum does bring the catch, that a £199pw full-time wage would attract no help, and yet bring in only 13p more for a whole week's work than sitting idle at home on benefits. Therefore it would not be worthwhile. The solution to this “poverty trap” is to give the minimum wage a significant premium to the benefit rate. I would suggest that working full-time needs to bring in at least a third as much again as total unemployment to be a viable choice. This would be 1/30 of the basic Income Support rate, assuming as usual a 40 hour working week. ( Obviously, benefit claimants with extra claims, such as dependent children, would still receive Income Support to cover their extra entitlements.)
1/30 of £198.87 comes to £6.63. This turns out to be a larger percentage of average wages than the direct calculation from them, a sign that the high local pay rates are more than offset by the even higher local cost of living.
There is a trade-off in all this: To be an economically viable job, the output must add more value than the pay rate. There is a ceiling to the market values of all goods, services and “solutions”, and if the pay rates of the providers rise too high, they simply price themselves out of work, whether the employer downsizes earlier or goes broke later. In hard times, the gap between the minimum legal wage and the maximum viable wage may become critically small, or even negative. However, to keep poor and demoralised workers from clogging and bleeding the benefit system, and more importantly, to maintain a just and prosperous society, the minimum wage must be upheld, even if it costs a few already marginal and insecure jobs.
Shades of things about to come Updated.
3 days ago