“Living Wage” a meaningless term

I don’t like George Osborne, but he is a cunning operator. In the recent Budget, he stole the Left’s clothes by introducing a “National Living Wage”. Brilliant.

Introducing it was not the cunning move, of course. Redefining it was. Instead of the academically agreed figure of £7.80, he put it at £7.20. He then said he’d raise it to £9, more than Labour. Furthermore, he restricted it to age 25+.

His opponents inevitably struggled because actually here were the Conservatives shifting responsibility for subsidising low pay from the taxpayer to Tesco’s.

And then they fell into the real trap. “Ah, but given what he has done to tax credits, the real living wage is now £12”, screamed some.

Hold on.

Not everyone qualified for tax credits, and they come in different forms in varying amounts depending on age, income and dependants. In other words, tying the level of the “Living Wage” to tax credits is an admission that it too depends heavily on circumstances. And if it depends heavily on circumstances, it varies from individual to individual and from time to time, rendering the whole concept (at least when expressed as an hourly figure) meaningless.

This may be no bad realisation. Low pay is a huge economic scourge. The “Living Wage” was presented as a magic bullet when it isn’t. The real issue is low productivity (30% below Germany’s) resulting inevitably in low wages. Sorting that needs not a magic bullet, but a more fundamental structural change.

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