THE BLOG

Increasing Minimum Wage Would Be More Than a Political Statement, It'd be the Right Thing to Do

14/01/2014 10:02 GMT | Updated 15/03/2014 09:59 GMT

The government inherited a dire economic legacy and we're right to celebrate the fact that the economy looks to have turned the corner, with jobs being created and new businesses being established. This time we have to make sure that the recovery reaches everybody in society, particularly the low-paid and people living in parts of the country that didn't benefit from the prosperity of the 1980s and the Blair years.

Too many people, such as low-paid workers, people waiting in the social housing queue and those living in high unemployment towns, think that capitalism doesn't seem to be working for them. The free market is by far the best way of creating wealth, jobs and innovation and it's incumbent on those of us who believe in the benefits of the market to show how it can work for everybody in society. That's why Renewal is launching 'Renewing Capitalism' - a programme of work that aims to show how the free market can spread prosperity throughout society.

That means standing up for the consumer and the small business owner, ensuring that we create a genuinely competitive environment in which enterprise can flourish but corporate monoliths are not able to manipulate their market position to rip off the consumer. Conservatives shouldn't stand by and watch if monopolies or oligopolies are seen as ripping off the consumer or treating their workers badly. We should be willing to tackle vested interests wherever they exist.

There remain too many examples such as those uncovered by Rob Halfon in water, where monopoly provision has meant that Director's salaries have rocketed as bills have increased above inflation, or other examples with banking charges or utility fees. We should follow the example of Teddy Roosevelt and ensure that conservatism is seen as being unafraid of correcting market failure where it occurs and ensuring that a genuinely competitive environment exists.

Conservatives also need to show that they understand the concerns of the low-paid and the sacrifices that the low paid have made over the last decade or so. This means building on the laudable decision to lift the lowest paid out of tax altogether and increasing the National Minimum Wage. Three quarters of voters still think the Conservatives are the party of the rich and only 14 per cent of voters think that the Party best looks after the interests of low-paid private sector workers (it's only nine per cent for the public sector). Increasing the Minimum Wage would be a powerful statement that Conservatives aren't the party of the rich and big business.

Increasing the Minimum Wage would be more than a big political statement, it would also be the right thing to do. Wages have been trailing prices for the best part of a decade and the low-paid didn't benefit from the second half of the Blair boom. Between 2004 and 2008, GDP increased by over 11 per cent, but real incomes stagnated at best. Since 2008, according to the excellent Resolution Foundation, the minimum wage is worth £1,000 less after inflation. Increasing the Minimum Wage would also increase incentives to work, reducing the benefits bill and reducing the tax credits that the state pays to top up low pay.

Such a move would also mean that Conservatives acknowledge that low pay can have social consequences, impacting institutions like the family and community that conservatives rightly hold dear. It's clearly important to ensure that any increase in the Minimum Wage should not impact on jobs, which means that it should be accompanied by a reduction in business taxes. However, it's worth reading this superb blog from former Downing Street Head of Policy, Paul Kirby, which discusses the potential impact of a NMW rise and suggests that worries about the impact on jobs are exaggerated.

It's important for Conservatives to show that conservatism and capitalism benefits everybody in society. The party talks about helping hard working people and it's crucial that people who work hard feel that the system is working for them. It's crucial that Conservatives show that the free market can provide benefits to everybody in society, setting out a bold vision of renewed prosperity for all. That will help the party break through in areas that have long been no-go areas and, more importantly, will improve the quality of life for many working people.