There was little that could cause consternation in Keir Starmer’s recent speech to the TUC Congress. A ban on zero-hour contracts, an increase to sick pay, the right to flexible working, rights from the first day of employment: all of these, constituent elements of Labour’s so-called ‘New Deal’, are eminently sensible, unmistakably social democratic goals. Yet the reassertion of Labour’s desire to raise the minimum wage to £10—a figure that the party has been referencing one way or another for the last six years—ought to prompt a degree of strategic reflection.

Labour first argued for a £10 minimum wage in 2015: a demand reiterated in the 2017 manifesto, calling for the uprating of George Osborne’s cynical ‘National Living Wage’—a governmental rebrand of the minimum wage—to meet the levels of the independently calculated ‘Real Living Wage’, which is based on the amount genuinely needed to get by. (For more on the genesis of both the so-called National Living Wage, and the campaigning work which led to the formation of the Living Wage Foundation, see ‘Britain’s Low-Pay Scandal’, also in Tribune.)

Two years later, Labour’s 2019 manifesto called for the rapid introduction of a ‘Real Living Wage of at least £10 per hour.’ Is the call for £10 an hour, made in 2021, for an election likely to be fought in 2024, enough? This seems unlikely. April 2017 was the last fiscal year where the Living Wage Foundation themselves calculated the Living Wage in London as falling under £10 per hour. On pre-Covid projections, the minimum wage will have reached—and surpassed—£10 per hour by 2024.

Indeed, it is useful to reflect on the Conservative Party’s own strategy vis à vis the minimum wage. Compared with the vociferous opposition that greeted its introduction in the late ’90s, there has been something of a damascene conversion on Conservative benches. As the Economist has noted, Britain may soon have one of the highest minimum wages in the world, close to 70 percent of median incomes.

This represents not some newfound benevolence on the part of the Conservative Party, but rather a degree of strategic fluidity. Per the OECD definition, low pay is calculated as two thirds of median hourly incomes. It would be a rhetorical coup for the Conservative Party to be able to announce–on a purely technical definition–that they had conquered low pay in the British economy. Of course, the Low Pay Foundation recently found that by its definition 3.7 million workers, 12% of the entire workforce, were low paid and a 2020 study further found that 57% of workers struggled to pay their bills on their current wages. Low pay is still endemic to the British economy.

At such a juncture, it is worth thinking more deeply about the nature of minimum wages. Was New Labour’s passage of the National Minimum Wage Act in 1998 a triumph of labour against capital? Or, rather, a valediction to such a world view; an acquiescence to Thatcherism? With the passage of time, it is hard not to veer towards the latter analysis. From 85 percent of wages being set by collective bargaining in 1975, to around 25 percent today, it is difficult to refute the view–offered in a 2002 economics working paper–that ‘no other country in recent years has witnessed greater change in its collective bargaining framework than the UK.’

Revitalising collective bargaining needs, therefore, to be a key demand going forward. It is encouraging that Starmer referenced it in passing his TUC speech, but – although Andy McDonald has recently announced other excellent policies for gig economy workers – it is nowhere to be found on Labour’s own ‘New Deal’ site. Here, we would do well to look towards the Nordic nations, which remain somewhat unique in having no legally stipulated minimum wage. Wage levels are instead negotiated by collective agreements between employers’ federations and unions – the state, in the vast majority of cases, takes a back seat. As noted in a previous Tribune interview with the Danish politician and writer Pelle Dragsted, Denmark—where unionisation remains high—has seen much less of a decoupling between wages and productivity than other comparable developed nations.

Across the European Union—perhaps unsurprisingly—the nations with the lowest levels of collective bargaining are also those with the lowest wages. In the United States, research from the Economic Policy Institute has shown that average wages would be almost ten percent higher had precipitous declines in unionisation rates not taken place.

Indeed, work published in the British Journal of Industrial Relations shows that precisely the model the UK is moving towards—a proportionately high value minimum wage coupled to low levels of collective bargaining—‘may be associated with a high share of low-wage employment and a spike in the wage distribution at the wage floor’. This is borne out by the data. In the UK, around 20 percent of jobs—5.5 million jobs in total—pay less than the Living Wage, and 15 percent of jobs are classified as low-pay per the aforementioned OECD typology – almost twice the number as in Denmark. Research shows a robust correlation across advanced economies between the proportion of workers covered by collective bargaining agreements and the shares of workers in low-wage employment.

An economic model relying on a minimum wage absent strong collective bargaining is, for the left, an admission of defeat: a response to the unravelling of worker power not by seeking to build it back up, but by accepting this status quo as a permanent phenomenon. The state steps in and sets a floor, where once union power and collective strength delivered the goods. The problem, however, with such a floor is that it exerts a considerable gravitational pull: wages for the low-paid cluster around the legal minimum. In other words, this legal floor can become a ceiling: it is unsurprising that research shows that when ‘collective bargaining is weak, there is a risk that many workers’ wages will be clustered around the minimum wage, dragging down median or mean wages.’

A £10 minimum wage—in the context of the UK’s contemporary political economic constellation—is nothing to be sniffed at. It is a laudable aim, albeit one that could do with some updating. But for socialists, and those committed not just to mitigating the inequities of the British economy, but to fundamentally transforming it, it needs to be supplemented by a serious, concerted, and sober effort to make clear the advantages of collective bargaining.