Would Increasing the Mininum Wage close all “loopholes” and solve all problems

3 days after Miliband announced his intentions to close a “loophole” which allow employers to employ cheap (apparantly mostly foreign) workers at the expense of the great British worker, I am still no closer to understanding what the loophole is nor how the Man with the Unelectable Forehead proposes to close it.

Presumably he refers to “Swedish Derogation”, in effect an amendment to the Agency Workers Directive. The AWR guarantees agency workers who are employed by one company for 12 weeks or more the same rights as workers in the company they are contracted to. The Swedish Derogation put simply, allows employers to offer workers pay whilst not working in exchange for a waiver of the right to equal pay. Conditions as ever apply.

For a brief but effective overview see here:http://www.bathemploymentlaw.co.uk/latest-news/temps-working-at-tesco-urged-to-opt-out-of-agency-workers-regulations.html

So we can see that this is no “loophole”, “get-out clause”, choose your cliche, but a solid, if confusing piece of EU generated employment legislation, one which strikes me as burdensome to both workers and employers, though employers have the advantage by a short head. Does Labour thinks they can indeed find a loophole in the loophole and get out of Swedish Derogation? I’d be delighted to know what they propose. Swedish Derogation has already been tested and found not wanting with regard to a significant arena for interpretation, namely whether it applied to new hires or long term temps.
In a tribunal back in January last year, a tribunal found that it DID apply to long term temps. For a surprisingly readable account the following is excellent: http://www.out-law.com/en/articles/2013/january/agency-workers-swedish-derogation-does-not-need-new-hire-to-apply-says-tribunal/

It’s worth noting that this first test case did not feature low paid immigrants in food factories, but well paid tanker drivers who had in some cases had been doing the job for years, albeit at 70p an hour less than than the permanent drivers.

This is not to say that the impact of Swedish Derogation will not most keenly be felt by those at the pointy end of the labour market, but to assert that this means employers can cut wages to indigenous British workers by employing immigrants is not merely misleading but technically incorrect. It is also a disappointingly disingenuous piece of populism.

Furthermore it seems to obvious to point out that should employers want to avoid AWR altogether then they simply have to ensure that they don’t hang onto them for longer than 12 weeks. Given the competition for jobs in the unskilled sector this shouldn’t be a problem. Anecdotal evidence locally would indicate this practice is not unknown.

Whatever the fact is that the use of temporary workers is increasing and that, as far as my crude research and intelligence-gathering can determine, most employers are quite happy to go with AWR. Also the idea that temporary work is exclusively the province of low-paid occupations can be blown apart by looking at very recent stats from the Office of National Statistics, which shows the increased use of temporary workers being used across the board. Many temporary workers are also happy to work like this.


So  there you have it, not only is a Party leader talking carelessly but he is unlikely to be able to deliver what he promises – finding some way of re-interpreting and implementing that re-interpretation is frankly, not only impossible, but would not I believe, help with the problem of low wages. This is the core problem for not only many temporary workers but millions of others and addressing it removes the need for ineffectual tinkering with complex and burdensome legislation at a stroke.

I am not alone in thinking the solution to this is to bang the minimum wage up to a decent level. I would guess that 7.25 is about right, above the “living wage” touted elsewhere. The difference between the living wage and any increase in the minimum wage is not merely being money, but that the minimum wage is laid down in law. The effects of this could, I would suggest be immediate and significant and any potential negatives insignificant.

The most obvious and easy to predict would be an increase in consumer spending, whilst also important would be a reduction in ruinous short term borrowing and a reduction in the payment of tax credits.

The possibility that such an increase in wages could result in job losses could be discounted, indeed I think that it could result in a further reduction in the claimant count as the differential between benefits and wages was narrowed.

Whatever, if there is a living wage or beyond guaranteed, the need to beggar about with interpretations of EU legislation will be eliminated and two fundamental problems of any economy will be addressed to some degree, namely poverty and demand.

Meanwhile Miliband is merely “campaigning” and, unless I have interpreted his speech on the Living Wage incorrectly, there is no proposal should (hah!) he be elected, to increase the minimum wage. It would all be about “incentives”


Shame really. As Miliband himself reports the living wage is supported by business who, like myself are hardly supporters of socialism. Making the living wage, or above it the minimum wage should be something at least the Labour party should commit to. Who knows, it might even make them electable.


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