EU Directive: Adequate Minimum Wages

Question

Asked by

To ask His Majesty’s Government what assessment they have made of the EU Directive on Adequate Minimum Wages and the merits of introducing similar provision in the United Kingdom.

My Lords, as with other relevant EU directives, the Department for Business and Trade is monitoring the EU directive on adequate minimum wages. As we are no longer an EU member state, we are not obliged to transpose its directives, but we note their progress. The UK has a long history of minimum wage legislation. Introduced in 1999, the national minimum wage has been a highly effective policy. We remain committed to improving living standards and, as of 2024 among G7 countries, the UK had the second-highest minimum wage relative to the average wages of full-time workers.

I thank my noble friend for that reply, and I welcome this Government’s determination to deepen relations with the EU and ensure that UK workers’ rights do not fall behind those of their EU friends. This new directive has been described as a game-changer in the fight against in-work poverty and as strengthening a social market economy, because it is about promoting collective bargaining. The evidence is clear that the bigger the collective bargaining, the more workplaces are safe, more equal, healthier and more productive. Given that EU member states will now be required, where collective bargaining coverage falls below 80%, to devise with social partners action plans to promote collective bargaining, will my noble friend agree to talk to Ministers about convening a meeting with the CBI and the TUC so that we can devise our own action plan here in the UK?

My Lords, the Government agree that a strong voice for workers is a positive for the economy as a whole. We believe the best way of delivering that is to start with implementing the ambitious measures in the Employment Rights Act, including introducing the fair pay agreements in social care, reintroducing the school support staff negotiating body and widening improvements to trade union processes. We do not intend to create an action plan or a specific target for collective bargaining at this point in time. We have consulted the TUC and the CBI on this measure and thank them for their input.

My Lords, I am sure the Minister would acknowledge that an important precursor to people having wages is for them to have a job. I am sure that he would also recognise, perhaps reluctantly, that the number of jobs available, particularly for people at the lowest end of the wage scale, has taken a hit of late. So, can the Minister undertake to visit his friends in the Treasury and explain that their unheralded increase in employer NIC contributions has seriously hit the job prospects of the very people that his party said it was here to help?

My Lords, I fully acknowledge that businesses face challenges and that micro-businesses operate with narrow margins and encounter real pressures, and these businesses are the ones that employ young people. However, the evidence consistently shows that paying staff fairly strengthens businesses in the long run: higher wages and lower staff turnover boost morale and productivity and help businesses keep experienced workers. Crucially, these wages are then spent within local communities, often in small shops, cafés and services right across the country. A national living wage supports not only workers but the resilience of local communities.

My Lords, we have been lucky enough to have a 30-year run of structurally low unemployment, which is now coming to an end, especially with younger workers—partly because of the national insurance rise that the noble Lord, Lord Fox, just raised; partly because of the general economic situation; partly because of the Employment Rights Act; but also partly because of these huge recent rises in the minimum wage, which have especially hit the hospitality industry. Does the Minister see the danger that as we have more and more workers’ rights, we have fewer and fewer workers?

The noble Lord would not expect me to agree with him, and I do not. As I mentioned in yesterday’s debate on the regret amendment, and I shall share it again, Confucius reminds us that harmony among people is the best foundation for great achievement, and when we work together, success belongs to all. We have to address this issue of disparity between workers who are paid less and less in the overall scheme of things and the average wage in the country. We need to balance that up to two-thirds of the median wage.

My Lords, given the Minister’s background as a successful entrepreneur, does he agree that, whether coming from the EU or from here, minimum wage directives are not economically sustainable unless they reflect the employer or the state’s ability to pay out of revenues rather than increased borrowing?

I also gently remind noble Lords that the minimum wage is carefully considered by the independent Low Pay Commission, chaired by the noble Baroness, Lady Stroud, which examines the economic conditions, labour market data and evidence from employers and other stakeholders. The Government’s aim remains to set a wage floor that maintains living standards while protecting employment opportunities. Recent rises mean that the national living wage now makes up a historically high proportion of median earnings, supporting millions of low-paid workers right across the country. I am sure that noble Lords will agree that paying workers well is good for the economy.

My Lords, the 80% minimum collective bargaining coverage in the directive curiously mirrors the 80% coverage achieved in Britain from 1945 until 1980, mandatorily through the wages councils and voluntarily by the joint industrial councils. The Government have made a good start with their adult social care negotiating body and the other body for school support staff. What further steps will they take to achieve sector-wide collective bargaining across British industry?

First, let me say that collective bargaining is not a dirty word. The Government recognise the important role that collective bargaining can play in supporting good workplace relations. However, the United Kingdom has traditionally taken a flexible, decentralised approach to setting wages. Our focus remains on securing a strong statutory minimum wage through the national minimum wage and the national living wage, guided by the independent Low Pay Commission. Alongside that, we continue to support fair work practices and to promote constructive engagement between employers and workers across all sectors.

My Lords, the number of young people not in education, employment or training is approaching 1 million. What an utterly devastating waste of human potential. The Government have announced a £3,000 taxpayer-funded subsidy for hiring eligible 18 to 24 year-olds. In saying that, are they not admitting to employers, “We will now subsidise you to hire the very people you could not otherwise afford to take on because we put up employers’ national insurance”? Will the Minister at last admit that this proposal is an admission of abject failure by this Government?

My Lords, first, backing young people is one of the most important investments that we can make in the country’s future. We are determined to tackle the rise in youth unemployment, which has been constantly rising for the past 10 years or so, by expanding practical routes into work, boosting apprenticeships and giving employers the clarity that they need. We are very proud to say that the youth guarantee scheme is unblocking thousands of jobs. We are investing more than £1 billion and unlocking 200,000 jobs and apprenticeship opportunities by reducing the cost of hiring for business. This Government are determined to get young people back into work.