The TUC has announced its proposals for a £15 minimum wage to be achieved as soon as possible, the current minimum wage is £9.50. The report outlines that the target for the minimum wage is for it to be 75% of the median wage and the median wage target should start at £20, ergo the minimum wage should be £15. As the TUC’s report outlines, in real terms, workers are earning £88 a month less now than they were in 2008, and this is before the impending hike in inflation is factored in.
The government’s decision to tie the wage floor to median earnings has made any rise contingent on rising wages, which, after twelve years in power, the Conservatives have proven themselves to be unable to deliver. The proposal for the minimum wage increase is therefore part of a wider set of proposals on the part of the TUC for increased bargaining power for the trade union movement and more power for workers. This includes the much announced but never implemented policy of having workers on company boards.
However, these proposals are contingent on having a Labour Government. While a Conservative government will raise the minimum wage it has demonstrated that it will not countenance making trade unions a more prominent feature of society, and the recent anti-union rhetoric from Liz Truss demonstrates that the Conservative Party will always define itself in opposition to organised labour.
The best driver of wage growth is more powerful trade unions (even if profits do not grow, unions can help redistribute those profits more fairly) and the only party that will enable this is Labour, as demonstrated by its green paper on employment rights. Indeed, in this document Labour essentially proposes what the TUC (of which only twelve of its forty-eight unions are affiliated to the Labour Party) refers to in its report as the ‘New Zealand Model’, with sectoral collective bargaining agreements being implemented.
Moreover, the recent Guardian op-ed by Angela Rayner and Rachel Reeves indicates that although Labour has been reluctant to commit to a precise figure on minimum wage, it would not be innately against the proposals of 75% of median wage. In this piece, Reeves and Rayner outlined that a Labour government:
Will change the Low Pay Commission’s remit so that – alongside median wages and economic conditions – the minimum wage will for the first time reflect the need for working people’s pay to at least cover the cost of living
This complements the TUC’s declaration that:
The Low Pay Commission should be tasked with progressing the minimum wage to this higher target based on prevailing economic circumstances.
While Labour, in a bid to demonstrate their economic sensibility, may continue to resist putting a value on the minimum wage, it is evident that their preferred framework for wage growth has much in common with the TUC’s and its support for increased individual and collective workers’ rights will facilitate stronger trade unions and a rise in wages.
Improved collective bargaining is a fundamental part of the TUC’s proposal. Essentially, the idea seems to be that a higher minimum wage and median wage will complement and reinforce the other. It is significant that all the affiliate unions support the TUC’s policy (as will be demonstrated at the TUC’s Congress in September). For instance, USDAW has previously called for a £12 an hour minimum wage, and Gary Smith, GMB’s general secretary, has frequently called for care workers to be paid £15 an hour. Both demands will now increase as the minimum wage increases. Indeed, something often not sufficiently commented on in minimum wage analysis is its impact on higher wages.
Historically, some unions (and a young Keir Starmer) were against the introduction of a minimum wage for fear that it would erode wage differentials (the difference between one person’s wages and another’s). While a narrowing of differentials can occur due to minimum wage, a significant minimum wage increase could also provide a solid foundation for wage bargaining for more skilled labour. Take the often-cited example of a nurse, current starting pay for a nurse in the NHS is £27,055 and the current minimum wage of £9.50 an hour (if multiplied by the standard 37.5 hour working week of a nurse) would equate to an annual salary of £18,525. A £15 an hour minimum wage on 37.5 hours a week would provide an annual salary of £29,250. Therefore, nurses’ pay would have to increase in order to retain nurses, and trade unions are the best bodies for negotiating this pay and ensuring that work is not undervalued.
While this a rudimentary calculation, and there are other factors influencing pay than just supply and demand (and public sector pay has decreased in real terms while there has been a minimum wage), it does demonstrate that even a minimum wage decided as a proportion of the median salary, can itself support an increase in that median salary if it causes a labour shortage amongst more skilled workers. However, to make the most of a rising wage floor as a foundation for bargaining (and to avoid minimum wage compressing wage distribution) strong unions and a supportive regulatory framework are a necessity; without them, employers will simply underpay the higher earning employees. It is this principle of bargaining that is intrinsic to trade unions and encapsulates why the TUC have emphasised the minimum wage as means to support better collective bargaining and placed it in a wider framework of necessary labour market reforms.
While some will no doubt criticise the TUC’s proposals as insufficient, its newly announced commitment to a £15 minimum wage as soon as possible is significant and much needed. However, much of the potential discussion around it is moot until there is a government willing to engage with organised labour. Only a Labour Government will do this, currently it appears as if the TUC and Labour are in broad agreement about the changes that need to be made to advance the rights of workers. A £15 minimum wage is by no means incompatible with Labour’s recent announcements on the subject – which is to leave it to pay review bodies and unions to negotiate rises. The proof of the pudding requires Labour to win power at the next election and deliver the first real terms pay rise the majority of workers will have had in well over a decade.