The Case for a Living Wage

Today the Chancellor outlined just how much of an economic mess this country is in. According to George Osborne, the UK economy is now unlikely to grow beyond 1% in either this year or the next. Various factors are trotted out to explain our decline; so far Osborne has blamed snow, strikes, riots, Europeans, and even Kate and Wills.

As for answers, most of the Government's rhetoric has been directed towards 'deregulation' and 'easing burdens on businesses'. Examples of this include Vince Cable's plan to make it easier to sack people and Chris Grayling's intention to scrap the vast majority of EU health and safety provisions. Welfare reforms designed to encourage people back into work have very much taken on the 'stick' rather than the 'carrot' tone with punitive new measures for job seekers who refuse work.

The problems in the British economy mainly derive from an absence of key demand. Growth is stagnant because people are not working and therefore not spending. Any plan to change our economic fortunes must be geared towards motivating the human capital largely wasted at the current time.

One way of doing this is to introduce what has been called the 'living wage'. Put simply, this involves raising the national minimum wage rate to £7.20 (£8.30 in London) from its current level at £6.08. The living wage is designed to enable every worker in the country to provide their family with the essentials of life. Currently, the scheme is voluntary and there are a number of employers that adhere to the campaign by paying their workers the higher rate. If it was incorporated into law, however, the economic benefits would be significant.

Firstly, it would serve as genuine encouragement for those on welfare to find work. Many young people in particular fail to see the incentive in finding a full time job that promises a weekly income of £200 at the most. Instead, they are content to spend their time on benefits at a huge cost to the taxpayer or, failing that, many turn to a life of crime to supplement their earnings. While tough welfare reform to prevent abuse is also required, the introduction of a living wage would motivate those in desperate situations to turn their lives around.

Secondly, it would improve levels of productivity in the economy. If employees know that they are receiving a decent wage they will be more likely to work hard to keep their jobs. In addition, they would be more likely to actively seek out promotion opportunities in order to rise further up the income scale. Improving productivity in the workforce is hugely important for the UK given the fierce competition from highly efficient economies, such as China and India.

Employers who have brought in the living wage have reported a 25% drop in absenteeism and significant gains in terms of work quality as a result of moving to the higher rate. Rather than making employers more cautious before taking on new staff, therefore, there is every chance that the living wage could actually boost recruitment.

David Cameron and other senior Conservatives like Boris Johnson have voiced support for the living wage campaign. If they truly believe in the merits of this cause, however, they will pledge to enact the living wage as law in order to get our economy moving again. Doing so would send out a positive message that trust and optimism will get us out of this mess, rather than the fear and division current policies are producing. Time will tell if the Government has the bravery to face down its demons and do what is right for our country.

We Must Not Let Eurosceptics Ruin Our Future

It's decidedly unfashionable these days to say anything positive about the European Union. Received wisdom is that European integration has become a 'failed project', an obsession of the political class enjoyed at the expense of ordinary people in the UK. The recent problems in the Eurozone have served to add fuel to the fire with any prospect of the UK joining the single currency howled at with derision by almost all mainstream commentators.

While only one national newspaper, the Daily Express, advocates outright withdrawal, it surely cannot be long before all centre-right media clambers onto the bandwagon. British politics has become hugely Eurosceptic in recent years. The UK Independence Party (UKIP) is set to replace the pro-european Liberal Democrats as the third largest party at election time. This in turn has shifted the centre-ground further towards the Eurosceptic cause. Whearas the Conservative Party was previously divided on the issue of Europe, with fierce battles between the likes of Ken Clarke and John Redwood, these days Tory backbenchers and activists are almost exclusively hostile to all things European. The debate now within the party is how to go about distancing the UK from the EU, not whether this is a desirable objective.

There is no doubt that Europe faces challenges and needs reform. The aysemmetric development it has undertaken since the advent of the Euro was always going to create problems. Economies in southern Europe, such as Greece and Italy, are fundamentally different from Germany and France and require contrasting monetary policies in the abscence of fiscal harmonisation. As George Osborne has pointed out, it is a matter of 'remorseless logic' that the only solution to the Eurozone crisis is full fiscal integration (without the UK, of course).

This should not, however, obscure the cold hard reality that the UK needs Europe. Eurosceptics like Nigel Farage & Co simply have no idea of the modern world in which the UK has to exist. For them, it is still 1910 and the British Empire serves to protect our economic and military hegemony across the planet. We do not need help from a bunch of lazy, uncivilised countries on the continent.

The fact is that Britannia no longer rules the waves. China, India, Brazil, and Russia now rule the waves. The only possible way in which we can survive in this new world is by co-operating with our nearest neighbours on a more integrated basis. A Chinese trade delegation would not give much weight to a British representative claiming to represent a mere 60 million people. If that represenative spoke for 500 million European citizens, however, he may start listening.

So what does the EU need to do now? It must re-connect its leaders with the people and convince them of the merits of integration. One biproduct of economic downturns throughout the ages is nationalism. Only by making the argument that trade and co-operation promote growth and jobs will European leaders begin to really sell Europe. It must also address the continuing issue of the democratic deficit. The time has come for direct elections for the European President and the Commissioners. This will go someway towards ameliorating the sense of it all being a bit of a 'stitch up' by a bunch of unaccountable technocrats.

What cannot happen is for national leaders to turn their backs on Europe for good. It would be a fundamental mistake for politicians to retreat into a nationalistic comfort zone and indulge the false claims of Eurosceptics that we are 'better off out'. After all, the loser will not be the mandarins in Brussels, it will be the British people.