Workers Party Logo

THE WORKERS PARTY

Government hesitates to raise minimum wage in cost-of-living crisis

By Nina K (Workers Party GB Writers Group)

Despite the skyrocketing cost of living in Britain, the government has put on hold further increases in the minimum wage to narrow the gap between the lowest earners and those on higher pay. The government sees the April 2024 increase as having fulfilled a long-standing target to end low pay according to the OECD’s definition, stating the changes would benefit around 3 million workers. Whereas we know this pause on any further minimum wage rise is, in fact, designed to offer respite to business owners faced with higher wage bills to cover. 

The minimum wage increases pale in significance when we compare to ongoing high inflation. The inflation rate of 3.4% in February 2024 indicates prices have risen by this amount compared to the same time last year, though many will look at their food shop or monthly bills and understand 3.4% is an understatement! Prices are still increasing and don’t look like slowing down any time soon.  Real wages compared to prices are not expected to return to 2021 levels until 2027. For the typical household, incomes are set to remain below pre-pandemic levels in real terms even in 2027-2028. The bottom line is that pay packets have flatlined in real terms over the past 15 years by failing to keep up with consumer prices, while the profits of major corporations have only gone up and up!

There is also little help for those struggling to make ends meet. In the same week it was announced that minimum wage increases would slow down, Ofgem declared the energy price cap is would reduce to an average of £1,690 a year in April, which still 60% more than before the cost-of-living crisis! Some Economists seem ‘concerned about the 9.8% increase to the minimum wage, warning it could lead to stickier inflation, with Jonathan Haskel, a member of the rate-setting Monetary Policy Committee, asserting that this increase had been “uncomfortably large” and would have “big spillovers” on wages for staff higher up the pay scale. Its interesting to note that these same economists never raise the alarm about the impact on inflation from the massive increases to corporate profits.

Jon Boys, senior labour market economist at the CIPD, speaks of “a key moment in the UK labour market”, warning that headcounts will be hit if companies’ attention shifts from “helping staff weather the cost-of-living crisis to focusing on business sustainability and growth”.

“It’s crucial the workforce is seen as a key driver of productivity, profitability and value for organisations, rather than a budget line item that can be easily cut to save costs,” Boys said. 

This thinking falls into line with our commitment to investing in skills and training for the British workforce. A well trained and productive workforce will help organisations to build greater economic stability, thus contributing to a buoyant economy, making them better equipped to pay their workers a real living wage in the long run. 

The Workers Party’s commitment to increasing the personal tax threshold for the poorest paid workers by removing tax entirely from the first £21,200 of wages would give an annual boost of £1,700 to millions of lower paid workers. This would help businesses and workers alike in weathering any economic headwinds they may encounter.

We also understand the urgent need to stop the rampant inflation and promote sustainable growth, a key driver of all our policies. Our priority is to re-industrialise Britain, based on investment in new technologies, and efficient public spending directed at building infrastructures to provide future wealth and an active redistribution of assets to the benefit of the people. This would include significant reforms and investment in housing and the rental market, as well as nationalising essential utilities, so that any increases in wages are not swallowed up by exorbitant housing costs and skyrocketing bills. The UK has one of the highest minimum wages in the world, but this means nothing if the wages don’t pay their way. 

Give us your thoughts...