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George Osborne has just come out in favour of an above-inflation increase in the National Minimum Wage, in an interview with Nick Robinson.
It’s a classic piece of Osbornian timing. Ed Miliband is meant to be making his big speech on economic policy tomorrow, and this is perfectly timed to upstage him in the media.
Already the news is transmogrifying, among supporters and critics of the idea, into “Osborne raises the Minimum Wage”. That’s quite far from the truth – the Low Pay Commission are in charge of any change that might take place, not the Chancellor.
Despite all the huffing and puffing in Westminster, it isn’t really down to politicians to decide. Instead we have an odd game in which each side tries to guess what the Commission will do, and then publicly advises they should do that – early enough to take the credit if their prediction turns out to be correct. (Of course, the LPC could now ignore the Chancellor and decide against an increase, but evidently the Treasury believes it is a solid bet that it won’t.)
It’s the macroeconomic equivalent of those cunning councillors who finds out which streets are due to be resurfaced, then knocks on the residents’ doors offering to lobby the council to repair all those awful potholes. Two months down the line, hey presto! The road is repaired, as it was always going to be, and the councillor is the hero who – seemingly – made it happen.
The reaction so far suggests Osborne’s plan is working as he hoped – the Low Pay Commission are all but forgotten, his view is being discussed as though it is the actual decision, and Conservative advocates of a higher Minimum Wage are praising him. Add in the bonus of spoiling Ed Miliband’s evening, and he’ll view it as a job well done.
Here’s the reaction of David Skelton of Renewal, one of the leading proponents of the idea:
“For a party that once opposed the minimum wage this is a momentous decision. It shows that the Conservatives can become the real workers’ party, standing up for the interests of the low paid. Even a slight rise in the minimum wage will have a huge impact on people struggling to get by. Prices have outstripped wages since 2003. While the economy has been slowly picking up many hard working people have yet to feel any real benefit. Now is the right time to put a bit more cash in peoples’ pockets.”
As I wrote last week, I’m not so convinced that this step on its own isn’t harmful to the employment opportunities of young and low-skilled jobseekers.
However, this may not be the end of the story. Osborne has left himself plenty of room to pair a Minimum Wage increase with a cut in employers’ taxes. There’s a perfectly feasible timeline in which he makes this recommendation in January, the Low Pay Commission makes its recommendations in February, and then in March he stand up on Budget Day and present a tax cut as a direct result to the higher National Minimum Wage.
Some might call it sharing the proceeds of growth.