22nd April 2005

Dear Prime Minister

In your reply of 10 April to our letter of 11 February you said the government is examining possible changes to "the way the minimum wage is adjusted". Comments both before and since the date of your letter by the Minister for Workplace Relations suggest that he is considering a UK Low Pay Commission model.

This would not constitute a substantive reform. Contrary to Mr Andrews' statements, the UK body has not displayed economic rigour or struck "the right balance between the needs of the low-paid and unemployed". With a trade union representative, the commission is "unbalanced".

Indeed, the commission has effected no reduction in the UK minimum wage relative to the 43 percent of median earnings it recommended first up. That is well above the median in several other OECD countries, let alone where the market rate would be. As such, it remains a major employment deterrent, particularly for the unemployed but also for the many hundreds of thousands who (as in Australia) would like a job but are not officially unemployed.

It may be worth recalling, incidentally, that in real terms, the minimum wage fell in the 1980s during the Hawke government.

It should not be beyond the wit of Ministers to explain that, if a lower wage than the current minimum was allowed, those earning it at present need not experience a fall in wages. They are currently being employed because their productivity is sufficient to give their employers a return. But those not currently employed would have the chance under a more flexible system of getting a job at a wage lower than the (former) minimum.

Ministers ought also to be able to rebut any proposal for there to be some sort of guarantee that the minimum wage should be sustained in real terms. The consequence of that would be, of course, that those not employed would continue to be out of a job.

In short, in the interests of those looking for work (and of achieving an effective reform), the government should not retain a minimum wage system.

Yours sincerely

Charles Copeman

Alex Robson

Des Moore

John Stone