THE BLOG

Wake Up to Reality: We Must Be Bolder With the Minimum Wage

03/07/2014 15:32 BST | Updated 01/09/2014 10:59 BST

The national minimum wage is rising. In March, Vince Cable announced that the Government had accepted the recommendations of the Low Pay Commission and will raise the minimum wage to £6.50 per hour. On the same day as Cable's announcement, a report from The Resolution Foundationadvocated a rise to £6.94 per hour, and the Labour leader Ed Miliband has recently set out his party's vision for a minimum wage linked to median earning levels.

It's not enough. To me, this is tinkering around the edges of something that needs more of a bold approach. The recent 'naming and shaming' by HMRC of companies who failed to pay the minimum wage is also missing the point. Even when people receive the legal minimum, they are struggling - recent research shows that people in poverty are now more likely to have a job than not, and the amount of working people claiming housing benefit has leapt by nearly 60% in the last four years. This selection of case studies from The Guardian is a sobering reminder of what it feels like to live on low wages.

My company, The Clean Space, operates in one of the sectors that rely most on the minimum wage. I've written before about the living wage, which I support, and I would like to see the national minimum wage legally increased to that level. While the living wage remains voluntary, paying it to all my staff would make my business uncompetitive despite how much I would love to do so. In order to create a level playing field, it needs to be law - and yet this remains a controversial proposal.

I've been looking at evidence of the positive effects of high minimum wages and taking inspiration from other countries. Australia has one of the highest minimum wages in the world, and this article from an Australian business site points out that the country also enjoys one of the highest employment rates. It also mentions how low minimum wages harm the spending power of communities - and therefore the businesses they buy from - and force the state to intervene, in the form of benefits and tax credits.

In America, the city of Seattle has made history by legislating for a new minimum wage of $15 per hour, far more than the current federal minimum, to be phased in over several years. The state of Connecticut has also increased its minimum wage. Will Hutton argues in The Guardian that Seattle's radical step is a landmark event, setting out the reasons why it makes sense. I agree with him, and his comment about 'desperate and distracted' employees struck a chord. When my staff come into work, I want them to be focused on the job, not worrying whether they can pay the rent or buy food - however, the reality of the market means I can't currently give all my employees that security.

I would like to see the UK take inspiration from Australia and the US, and it seems that I'm not alone among UK small business owners in being in favour of an increased minimum wage. It is of course a hotly debated subject - the pros and cons are neatly summarised in this piece, and I'm aware of counter-arguments such as the possibility of increased unemployment or inflation. However, many of those fears seem to be unfounded as this piece from New Zealand suggests, and this sensible and balanced article from The Telegraph discusses the reasons to view a minimum wage rise with a positive attitude rather than be conservative.

The advantages of raising the minimum wage seem to be very clear - motivated staff leading to higher productivity and lower turnover, a lower benefits bill and greater spending power in communities to name a few - and I refuse to believe that the bright economic minds of this country can't come up with ways to mitigate against any possible pitfalls. The living wage is backed by a variety of prominent politicians, including the current London Mayor, which is admirable - but politicians need to take that all-important next step and make it law.

Currently, the Living Wage Commission is running an independent 12-month inquiry into the living wage, chaired by the Archbishop of York John Sentamu. The inquiry is taking evidence from individuals and employers about their experiences with wages - I'll be contributing, and I urge any business owner to do the same. Hopefully then, we can all do business with a clear conscience.

On Thursday 3rd July at 8:30pm I will be appearing on The Bottom Line with Evan Davis on BBC Radio 4, to participate in a discussion about mental health at work. Tune in or listen on demand via The Bottom Line's web page.