A National Minimum Wage (NMW) ensures that bad employers do not experience a competitive advantage; and because it encourages organisations to make the most of expensive labour by ensuring that their workforces are well trained and that production processes are efficient, and because increasing wages can reduce staff turnover, an NMW can improve the efficiency of both industry and public services. At the levels at which NMWs are usually set in developed countries, they have little effect on employment levels. The same arguments apply to a Living Wage: that is, a wage level that generates an income sufficient to meet the Minimum Income Standards i required for full participation in the life of our society. However, a serious problem is that increases in an NMW are of little use to low-earning households. This is not the fault of the NMW; it is the fault of means-tested in-work benefits. As earnings rise, in-work benefits are reduced, so the household sees little improvement in its disposable income.
Here is not the place to argue over whether or not an NMW or a Living Wage is a good idea. What is important is that the debate over whether a Citizen’s Income is a good idea, and the debate over whether an NMW or a Living Wage is a good idea are separate debates, and that a Citizen’s Income and an NMW are not mutually exclusive alternatives, as has sometimes been alleged. Indeed, a Citizen’s Income and an NMW would complement each other.
If everyone received a Citizen’s Income then a proportion of their subsistence needs would be met before they entered the labour market. Their Citizen’s Income would not function as a variable subsidy, as means-tested in-work benefits do by increasing as wages fall and thus accelerating a deterioration in wage levels; a Citizen’s Income would function as a static subsidy, thus depressing wages less. An NMW can ensure that more of an employee’s benefit to the company can end up with the employee, and a Living Wage would offer even more of such an effect.
At the same time, a Citizen’s Income would provide a secure income foundation for any section of the workforce that found it more difficult to get employment in an employment market regulated by an NMW. And, because a Citizen’s Income would not be withdrawn as earnings rose, a Citizen’s Income would mean that a rise in the NMW or the Living Wage would benefit low earning households far more than it does now.
i For UK Minimum Income Standards, see www.jrf.org.uk/publications/minimum-income-standard-2014
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101 Reasons for a Citizen’s Income offers a short, accessible introduction to the debate on a Citizen’s Income, showing how a universal, unconditional income for every citizen would solve problems facing the UK’s benefits system, tackle poverty, and improve social cohesion and economic efficiency. For anyone new to the subject, or who wants to introduce friends, colleagues or relatives to the idea, 101 Reasons for a Citizen’s Income is the book to open up debate around the topic. Drawing on arguments detailed in Money for everyone (Policy Press, 2013), it offers a convincing case for a Citizen’s Income and a much needed resource for all interested in the future of welfare in the UK.