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£10 Minimum Wage Campaign

May 3, 2015 12:40 PM

Thank you for contacting me with respect to the minimum wage campaign.

On both the councils I am part of until May we have increased wages in the last five years to ensure everyone is paid at least the living wage. On the Parish Council the principle way we ensured the pay rises benefited the low waged employees was to have annual salary rises of £500 per year and not percentage pay rises. So that percentage wise those at the bottom got more and than the employees at the top.

​Liberal Democrats believe that the success of our growing UK economy must be shared among all workers including those on low wages. We're proud of our achievements with record numbers of people in work; wages pulling ahead of inflation and a more balanced economy emerging.

Helping low paid workers has been a priority for Liberal Democrats in Government. We fought hard to cut taxes for people on low and middle incomes. Going even further than our manifesto pledge to let people earn £10,000 tax free, we have increased the personal allowance to £10,600. We plan to do even more if in government again raising the personal allowance to at least £12,500, cutting taxes for those on low and middle incomes by around a further £400.​ I believe the next step after this must be to increase the point at which national insurance has to be paid too.

We've also ensured above inflation increases in the National Minimum Wage (NMW), with the adult rate due to increase by 20p to 6.70 per hour in October this year. In doing so we've worked with the Low Pay Commission to ensure that rises in the NMW don't risk jobs. But we've also been clear that we expect the NMW to rise faster than inflation as the economy grows.

Liberal Democrats want to do even more for low paid workers. We want to see further increases in the National Minimum Wage, see more employers who can afford to do so pay at the Living Wage and put the Living Wage on a stronger footing. To achieve this we would again ask the Low Pay Commission to look at ways of raising the National Minimum Wage, without damaging employment opportunities. We would continue with this approach, rather than committing to raise the NMW to any set amount.

We would also improve enforcement action and clamp down on abuses by employers seeking to avoid paying the minimum wage, reviewing practices such as unpaid internships.

To promote the Living Wage, we would establish an independent review to consult on how to set a fair Living Wage across all sectors. We will pay this Living Wage in all central government departments and their agencies from April 2016, and encourage other public sector employers to do likewise. In particular we would work with local government to promote paying a Living Wage.

​My personal thoughts in this area are:-

Executive Pay​ has been a problem for years, the standard response is make the directors pay open to the public, and the shareholders will enforce fairer pay scales on the company. The reality is this does not work or has​ a​​ very limited effect.

I believe the only thing that will work is to link the pay of the lowest paid employee to the pay of the highest paid employee. This would mean the the person at the top would have a personal incentive to ensure the people at the bottom of the tree were well paid.

This link should be something like the highest paid employee total income (salary plus bonus) from the company should not be greater than 30 times the lowest paid employee total income from the company. This should be legally binding multiple.

The top person could still get a large salary but only if the entire company pay structure allows it.

The idea is to give a proper framework to pay structures in the marketplace. Currently we have minimum wage legalisation but nothing to define the top end. An absolute limit for the top to mimic the minimum wage would be nonsense in the free market. However even the free market operates within limits and standards. Therefore, a top limit on salaries linked to the lowest paid employee would give a framework in which all employees could receive fair payment for their efforts in generating the company's profit and turnover.

Some people are concerned that with small companies, particularly single owner ones, that this would not work, but it would. The key is to distinguish clearly between salary/bonus income and shareholder dividend income. In these companies, the owner is not always the highest paid employee. The owner in these companies is a shareholder with a 100% share in the company. The money that the owner receives is neither salary nor bonus but dividend, therefore my proposed link between the lowest and highest salaries would not apply.

The link is on salaries including a bonus, not on shareholder dividends. This is because the aim of a statuary multiple between the lowest and highest salaries in any company is to make all companies have fair wage structures, with reasonable not excessive differentials in pay.The aim of a pay structure should be fair pay for all, not excessive pay for those at the top.

I hope this answers your question.​