Osborne's call for minimum wage rise is 'cunning politics'

Jan 17, 2014

Press agrees rise is needed, but says timing of announcement is attack on Ed Miliband


GEORGE OSBORNE says he wants to see an above-inflation rise in the minimum wage. The Chancellor told the BBC that the improving health of the UK economy meant the country "can now afford" to raise the rate from £6.31 an hour at present to £7 an hour by 2015.

The Times applauds the announcement which, it says, would "return the purchasing power of the minimum wage to the level it was in 2008, since when its value has fallen in real terms".

While Osborne's proclamation can be seen as something of a stunt – the chancellor has no formal power to raise the minimum wage - it also makes sense from a political perspective, the paper says. Labour has been making substantial political capital from what it calls the "cost of living crisis" and lifting the minimum wage will blunt the Opposition's attack somewhat.

The Financial Times agrees that the timing of yesterday's announcement was highly political. It was scheduled to overshadow today's speech by Labour leader Ed Miliband on how he would tackle the cost of living crisis.

Politics aside, raising the minimum wage "makes a lot of economic sense" says The Guardian. "Prices have been rising more quickly than wages for the whole of the current parliament, squeezing real incomes and threatening to put the brake on the recovery. Lobbying for a higher minimum wage is one direct way the government can influence the level of consumer demand."

The Guardian says the "sniffy" response to the idea from business groups including the CBI was predictable.

"But only a couple of weeks ago, the CBI was itself calling for firms to raise wages during 2014," says The Guardian. "It can hardly bellyache now that the chancellor has responded to its call."

The Daily Telegraph's James Kirkup agrees that Osborne's announcement is politically motivated – aimed "fairly and squarely at the Labour leader".

In that sense, the timing is rather curious, writes Kirkup. Why? Because "a lot of people (including Labour people) think the Miliband argument is running out of steam, since wages are starting to creep up and inflation is easing. Surely a traditional Tory free-marketeer would now be sitting back and letting the Coalition's 'long-term plan' gently lifts wages and living standards without the dead hand of state intervention?"

Political blogger Guido Fawkes adds a note of dissent to the media's mostly positive responses to the idea of a minimum wage rise. He describes the idea as "fundamentally unsound" from an economic point of view, but concedes that it's "politically cunning".

Fawkes quotes the Adam Smith Institute to support his view that raising the wage rise will backfire. "Even if the immediate impact is not large, this increase will lead to a long-run decline in job creation and standards for Britain's poorest workers," the Institute says. "It will hurt the very people it is supposed to help."

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