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What is causing the stagnation of wages? Matthew Hancock MP sets out a Tory agenda for the low-paid.

By Tim Montgomerie
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I've just come back from an event at the Resolution Foundation. Matt Hancock MP was setting out a Conservative agenda for tackling low pay. You can read his speech in full here but the two big things you need to know about the event and the speech are...

  • A Conservative minister was addressing the subject, not pretending that wage stagnation wasn't real or that it wasn't important. He talked about how those on the median income (£21,583) had missed out on much of the boom years. He called that "unjustified".
  • He then set out three ways of tackling the problem:
    • "Strengthening" the minimum wage by ensuring there was always an appropriate incentive gap between being on benefits and earning. He said most academic evidence suggested no negative consequences for employment/ unemployment of the existing minimum wage although he said that that could change if it was increased too quickly.
    • Taking the low-paid out of the income tax system by raising the income tax threshold.
    • Making the workforce more productive by improving their skill set. He focused on the apprenticeship policies that he inherited from John Hayes MP.
Allister Heath of City AM was one respondent to to Matt Hancock. He was worried about Matt Hancock's remarks about the minimum wage and said that there was academic literature which pointed to negative consequences for job creation - particularly for the employment of the young and unskilled. He recommended that, instead of raising the minimum wage by large amounts, no worker earning the minimum wage should pay any income tax. Another respondent, Ryan Shorthouse of BrightBlue, urged a focus on ensuring children had appropriate basic skills by the critical age of five. He recommended a nine billion pound investment in higher quality childcare to help achieve this.

One unsatisfactory element of an otherwise stimulating speech and discussion was the lack of consideration of the contributory role of family breakdown to the weak earnings power of an increasing number of people. Technological change, global competition and the decline of manufacturing industry are undoubted contributors to a phenomenon affecting all developed economies but I would hope that a distinctive centre right contribution to the low pay debate would also focus on the collapse of the working class family and what might be done about it.

On other occasions we must also think about the costs side of the income equation. Matt Hancock was focused today on increasing wages. Conservatives must also focus on how we cut the costs of housing, energy, food, childcare and transport.


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