Evidence Based Policy: wage slaves

By Keir Liddle

Philip Davies, conservative back bencher and MP for Shipley, has caused something of a stir for making some rather contentious pronouncements about those with mental health issues, learning difficulties and the minimum wage. According to the BBC Davies had suggested that the minimum wage, £5.93 an hour for those over 21, £4.92 for those aged between 18 and 20 and £3.64 for 16 and 17 year olds, hampers the most vulnerable, including those with learning disabilities and mental health problems as they cannot negotiate for lower wages than able-bodied people.

Davies is ideologically opposed to the minimum wage and has decided that the cause of the disabled is the way to fight it when he suggests that:

“Given that some of those people with a learning disability clearly, by definition, can’t be as productive in their work as somebody who hasn’t got a disability of that nature, then it was inevitable that given that the employer was going to have pay them both the same they were going to take on the person who was going to be more productive, less of a risk, and that was doing those people a huge disservice.”

But have employment rates for the disabled and other groups improved, worsened or not been affected by the introduction of the minimum wage?

Has the minimum wage been shown to significantly impact on employment rates?

Well research into the minimum wage in Britain has shown, that far from the economic textbooks would suggest, that there is little or no evidence of any employment effects due to the minimum wage. Thus far it’s introduction has proved to be largely neutral compared to other economic factors and further research has produced similar findings. It would seem then that Davies contention that the minimum wage is harmful to employment levels is not supported by any of the extensive evidence gathered on the subject in the UK.

Some may rightly question the applicability of these findings to the current economic situation – given the UK based research was carried out in a period of boom not bust. However two research papers from the US, covering a time period which included many recessions, have come to similar conclusions: these are available here and here. They conclude that dynamic evidence further shows the nature of bias in traditional estimates, and it also rules out all but very small negative long-run effects. In addition, we do not find evidence that employment effects vary in different parts of the business cycle. They also criticise traditional approaches that do not account for local economic conditions tend to produce spurious negative effects due to spatial heterogeneities in employment trends that are unrelated to minimum wage policies.

Various reasons have been put forward as to why the supply and demand model doesn’t always hold for situations where there is a minimum wage is that it is oversimplified and some argue that it is logically incoherent. There are criticisms that the theoretical model has not been properly empirically tested and as a result the model is flawed see Michael Anyadike-Danes and Wyne Godley: Real Wages and Employment: A Sceptical View of Some Recent Empirical Work”, from 1989.

Although Davies doesn’t make the argument some do suggest that the minimum wage can be harmful because it damages businesses – something which this study refutes somewhat.

So it seems Davies efforts in attacking the minimum wage in the UK as a means of improving the employment rates of the disabled is an ill advised position at best and crass un-evidenced opportunism at worst.

However Davies is right that the disabled do suffer from employment discrimination:

  • Nearly one in five people of working age (6.9 million, or 19%) in Great Britain are disabled.
  • Disabled people are more than twice as likely as non-disabled people to have no qualifications (26% as opposed to 10%)
  • World Health Organisation (WHO) predict that by 2020, depression will be the most common form of disability.
  • Only about half of disabled people of working age are in work (50%), compared with 80% of non disabled people of working age.
  • There are currently 1.2 million disabled people in the UK who are available for and want to work.
  • The average gross hourly pay for disabled employees is £10.31 compared to £11.39 for non disabled employees.
  • 90% of people moving on to Incapacity Benefit expect to get work; after 12 months 40% would still be unemployed – with just a 20% chance of finding work within the next five years

Disabled people are hampered in seeking work and this includes able bodied people with mental health difficulties. However Davies suggestion that these people should be encouraged to negotiate to work for less is highly offensive. We need to address the stigmas of mental health and physical disability that suggests we are less worthy than the able bodied and challenge these assumptions. We need support to get back into the workplace, we need people to tackle the stigma that means we are seen as less worthy.

What we do not need is someone advocating we accept our place as second class citizens.

Readers of the 21st Floor may recall Davies previous antics where he suggested that Urdu books be removed from libraries in Bradford as they were damaging literacy rates. It is good to see that the MP continues to support his assertions with a similar recourse to evidence and data.

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0 Responses to Evidence Based Policy: wage slaves

  1. WillMill82 says:

    I’m not sure if I buy this idea that there has been no effect on the labour market following the introduction of the National Minimum Wage.

    Firstly, this paper suggests that in its initial years, the NMW *did* have a slight negative effect on hours worked.

    http://www2.warwick.ac.uk/fac/soc/economics/staff/academic/stewart/wp/hours_paper_feb_06.pdf

    This is what Metcalf would call reducing labour via the “intensive” margin…

  2. No one has suggested there has been no effect on the labour market. Simply that there has been no significant effect on the numbers of people employed or unemployed.

    It is entirely appropriate to debunk this as Davies central contention rests upon the idea that less people would be unemployed if there wasn’t a minium wage.

  3. woodchopper says:

    “We need to address the stigmas of mental health and physical disability that suggests we are less worthy than the able bodied and challenge these assumptions. We need support to get back into the workplace, we need people to tackle the stigma that means we are seen as less worthy.”

    I think that showing that people are just as worthy is probably the wrong approach. A job isn’t a reward handed out to someone who has proved their worth as a human being. If that were the case, there wouldn’t be so many arseholes in top jobs.

    Its given by one self interested party that needs certain work done for less than a certain cost. What needs to be done is to persuade employers that people with disabilities are just as productive, and don’t cost anymore to employ.

  4. Lee says:

    I’m 49 years old, have Asperger’s syndrome and have never worked. In order to get my first job I need to be able to offer an employer something, and I think that being able to work for less than minimum wage might just do it.

    I doubt that financially I’d be any worse off due to the complicated interaction between the various benefits I receive and the fees I have to pay to Social Services for my care.

  5. Because of the way my disability affects me, I work primarily from home in a self-employed capacity. I’m a professional writer with two degrees and extensive proven research skills. During the recession, however, work has been thin on the ground and I have struggled to find anything that offers decent pay. One of the reasons for this is that people looking to hire writers who don’t understand what quality work is worth (until they’ve seen it go wrong, anyway) use agencies which place projects through bidding. There are always people working to work for very little in this situation and it damages the whole industry. It screw over professionals like me. It screws over companies which end up with poor quality work. And, ultimately, it screws up the bidders, who work all hours and can barely afford to make ends meet.

    What people fail to understand about the minimum wage is that it wasn’t instituted simply to be kind to unfortunate poor people. It’s an economic tool. In a global economy, we cannot compete as a nation if we go down the under-bidding route. All that will happen is that taxpayers will end up paying benefits to support those who are working full time hours but still can’t earn enough to make ends meet. There are many positive ways we could be encouraging employers to take on disabled people but this is not a practical solution.

  6. woodchopper # 17 June 2011 at 8:54 pm

    “…A job isn’t a reward handed out to someone who has proved their worth as a human being. If that were the case, there wouldn’t be so many arseholes in top jobs.

    Its given by one self interested party that needs certain work done for less than a certain cost. What needs to be done is to persuade employers that people with disabilities are just as productive, and don’t cost anymore to employ.”

    I agree in the sense that a job isn’t reward for merit. To a very large extent it is a commercial entity. That does not however completely describe the relationship: an employer may seek the cheapest employee that can perform the basic job function, or they may look for an employee that will do the job at a much higher level of performance, or they may look for somebody with good business connections that could make new business.

    There are social and reputational factors involved also. As there are perceived factors surrounding risk: “will this person cause me problems because of xxxx”.

    So it is a matter of not only showing disabled people are competent but to remove the perceived risk, and also to ensure employers do not see implementing reasonable adjustments as an impediment but rather as a normal business function.

    The UK job market is far from egalitarian and does very much rely on the perceived “worth” of a person to the company.

    @Lee # 17 June 2011 at 9:15 pm

    “I’m 49 years old, have Asperger’s syndrome and have never worked. In order to get my first job I need to be able to offer an employer something, and I think that being able to work for less than minimum wage might just do it.”

    This proposal would protect those without a disability from exploitation whereas those with a disability – the vulnerable group in this situation – would not be protected.

    You are willing to work for less than the minimum wage, however I am not willing to do so and many other disabled works are not either. If this legislation were enacted, those willing to work for a pittance would undermine the rights of the majority. It is a fairly standard “divide-and-conquer” approach.

    Have you considered or undertaken voluntary work? It may be a good means to tip the balance in your favour when applying for work.

    @Jennie Kermode # 17 June 2011 at 11:28 pm

    “What people fail to understand about the minimum wage is that it wasn’t instituted simply to be kind to unfortunate poor people. It’s an economic tool. In a global economy, we cannot compete as a nation if we go down the under-bidding route.”

    I entirely agree.

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