In an article in the Independent, Ed Miliband has set out proposals for ensuring that the use of illegal immigrant labour, often paid far below minimum wage, is not allowed to bid down pay and employment prospects for all. He writes:
Instead, we will reform an economy hard-wired into a cycle of low wages, low skills, insecure jobs and high prices that is tearing into the living standards of ordinary families. It means taking measures to stop unscrupulous employers using workers from abroad to undercut wages and worsen conditions.
Official figures suggest that around 300,000 workers in Britain, often from overseas, are paid below the National Minimum Wage. But there have been hardly any successful prosecutions for breaking this law in the past three years and the Government has rejected Labour’s efforts to tighten the legislation.
I have already set out many of the steps which would be taken by a Labour government.
The next Labour government will substantially increase the fines for breaching the National Minimum Wage, stop the use of tied housing that undercuts the minimum wage and ban recruitment agencies from having a policy only to hire foreign workers
The next Labour government will require all large employers hiring skilled workers from outside the EU also to take on an apprentice so that both business and young people will be equipped with the skills they need to succeed.
And it goes wider than that.
If we are to win a race to the top, Britain needs a Labour government with measures to drive up skills and drive out exploitation. That means skills for the forgotten 50 per cent of young people who don’t go to university, guaranteeing work for young people out of work for more than a year, and outlawing exploitative zero-hours contracts.
There is a loophole in the laws around agency work which allows firms to avoid paying agency workers at the same rates as directly employed staff. This is being used in sectors where levels of employment from abroad are high, such as food production, and now accounts for as many as one in six of those employed by agencies.
The next Labour government will work with British business to close this loophole and ensure that agency workers cannot be used to undercut non-agency staff.
In taking this approach, Labour will be accused of dog-whistle politics. In fact, the entire package seems carefully calculated to avoid that – indeed, the disappearance of dog-whistle language like “hard-working families” and “British jobs for British workers” is one of the most encouraging aspects of Labour leaders’ language in the past year. There are ill-advised comments in Ed Miliband’s article – it simply isn’t true to talk about high levels of low-skilled immigration within the EU, and the language of “the race to the top” is inane – but on the whole this piece comes as a powerful corrective to the way the British political class has conducted this debate. The most important thing he does is to place the immigration debate fairly in its context. This is a debate about low pay – whatever the background of its victims. The reason why immigrant workers are the victims of the exploitation that Miliband condemns is simply because the employers who are exploiting loopholes can’t get away with it with employees already domiciled in the UK. This is about exploitation pure and simple. For example: ensuring agency workers are paid the same as permanent staff for doing the same job is a simple matter of economic justice; and it deals with a practice that is widespread and has nothing to do with immigration.
But there’s an important double standard here that’s worth unpicking a bit. I alluded to it in an earlier post about the contrast between the immigration and workfare debates.
The dominant narrative on the right is that “migrants” are talking jobs away from British people and depressing pay – it’s after all an obvious inference to make about supply and demand. Actually, it’s not true: there is ample economic evidence to this effect. As Polly Toynbee points out in an opinion piece in the Guardian yesterday, the truth in this case is counter-intuitive. There are undoubtedly individuals who have seen their jobs go to cheap and often illegal immigrant labour – but the overall effect is to increase wealth and employment (although I’d be the first to accept that the benefit doesn’t necessarily go to workers).
But there’s another scenario, in which low paid workers are seeing their jobs disappear – and that is workfare schemes in which young people in particular are required to work for their benefits. It means that larger businesses are getting their vacancies filled by cheap subsidised labour – which of course gives them a competitive advantage over smaller, local businesses that actually return value to the community rather than taking profit out of it, and which are likely to be a key engine of recovery.
And here the evidence is very different to immigration. There is now a growing body of evidence that the cost-of-living crisis for those on low pay – and indeed the steady fall in pay – dates back to 2003-4; and increasingly that appears to be attributable to the effect of workfare schemes in bidding down already low pay for semi- and unskilled workers.
In other words, if Labour is serious about its living wage agenda – and about dealing with the cost of living crisis – it is an absolute imperative that it commits to the ending of workfare schemes and commit instead to offering work that pays a living wage. We have to stop subsidising low wages – and here the evidence is on our side because the impact of big hikes in minimum wages has been widely studied (especially in the US) and there is no adverse affect on unemployment; on the contrary, increasing minimum wages – because of the multiplier and stabiliser effects – offers substantial economic stimulus. Labour’s record in this area is poor – perhaps its most shameful moment in recent months was the decision to support the Government’s retrospective law change to impose sanctions that had been ruled unlawful in court, in exchange for the sort of Whitehall review that was obviously nothing more than a punt into the long grass. It was a deeply humiliating moment for a progressive party, a nadir of moral and intellectual failure, and a credible and grounded Labour party is one that can admit the error and move on. Now is the time to do better.
Labour, then, needs to lance the workfare boil. It needs to accept that workfare schemes are both morally wrong and economically damaging, and learn that when it comes to pay and benefits, trying to out Daily-Mail the Tories is fundamentally defeatist; a confident party seizing the agenda (as Ed Miliband has done) has to be far better than this. If Labour is serious about tackling low pay and the cost of living crisis, corporate subsidies in the form of cheap labour for big business must stop.