Philip Davies in a spot of bother

Philip Davies MP pictured at the Rivendell Horse Sanctuary Show

Philip Davies MP is a good friend and an excellent chap.  He’s a prominent member of the Freedom Association.  But he seems to have got himself into a spot of bother with the media recently over comments on disability.  True to form, the Conservative Party has rushed to “distance itself” from his views — something I have sometimes experienced myself.

He seems to have said that people should have the right to price themselves into the labour market, and that the minimum wage poses particular problems for the most disadvantaged in society.  These views seem to me be self-evident, yet he’s been greeted with a storm of criticism from well-funded lobby groups and the progressive media, who accuse him of “calling for the disabled to be treated as second-class citizens”.  I am sure that he said, and intended, no such thing.

There are several Red Rag issues which politicians approach at their peril, and these include disability, homosexuality and (as I found recently, to my cost) rape.  No matter how measured the comment, the press will sensationalise, paraphrase, and pour vituperation on the politician concerned.  So let’s try to take the emotive issue of disability out of the equation, and think instead about the economics of the minimum wage.  The general classical liberal economic view is that a minimum wage, if set high enough to make a real difference to incomes, will reduce employment.  It will especially impact those who appear to be, for whatever reason, the least employable in society.

If an employer is looking at two candidates, both qualifying for the minimum wage, he will choose the one who ticks the most boxes for the particular job.  The rejected candidate has not been helped by the minimum wage.  He has been shut out by it.  We recognise this plain fact when we set a lower minimum wage for young people.  By lowering the barrier for them, we give them a better chance of taking that vital first step into the labour market, which may dramatically enhance what are these days called “their life chances”.  Young people, almost by definition, have less experience of work and the working environment than older workers, and a lower minimum wage helps to compensate for this disadvantage.  By woe betide the politician who suggests similar help for other disadvantaged groups.

The minimum wage also reduces employment overall.  I well remember in my previous career, looking at a cost/benefit and pay-back analysis on a packing machine that could have replaced four workers.  The decision went marginally against the machine.  But put up the hourly wage by 10%, and the machine would have won.  A wage rise would not have benefited those four workers — it would have made them redundant.

The analysis which applies within the UK applies more widely internationally.  We have the left-leaning International Labour Organisation (ILO) calling for higher wages and better employment conditions in the third world.  Who could argue with that?  But scratch the surface and their altruism looks more like protectionism.  They are concerned less for the benefits of workers in poor countries; more with maintaining the wages, conditions and Spanish practices of workers in developed countries.

Developing countries need to price themselves into markets.  That is the first step on the road to prosperity.  I was in Malaysia in the late eighties, running a textile business.  I saw agricultural workers on very low wages move to textile factories on slightly more money, then on to electronics assembly plants on better money again.  Today, Malaysia is a thriving economy rapidly catching up on Western standards.  If we’d insisted on Western terms and conditions in those textile factories, we’d have blocked development in Malaysia, and denied opportunity to the workers.

In the same decade I was involved in setting up a joint venture textile factory in Saigon, Vietnam.  I remember being shocked by the obvious poverty in the city, and asking myself what could be done about it.  Then I reflected that I was already doing the best possible thing — setting up a factory which would employ local people.  But of course if I’d been obliged to pay Western wages, the project would not have been viable, and the opportunity would have been denied to those workers.

What applies to employment applies equally to national economies.  Greece today desperately needs to price itself back into international markets.  That is at the heart of the Greek crisis.  Yet locked in the euro, it cannot do so.  It cannot devalue, and the alternative of internal deflation is not politically deliverable.  To use William Hague’s colourful phrase, it finds itself in a burning building with the doors locked.

Those who, in the name of human rights, deny individuals or countries the right to price themselves into markets, do them a great disservice.

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8 Responses to Philip Davies in a spot of bother

  1. Julian says:

    Philip Davies’ argument was that an employer faced with a disabled and a non-disabled person would choose the disabled person if they were prepared to work for less. I suspect this would only be the case if they were equally productive. In which case they should be paid the same anyway.

    Also, without a minimum wage, the state effectively subsides employment because of needing to pay increased benefits.

  2. If they were equally suitable for the position, I hope that the employer would not automatically reject the disabled applicant — and indeed might feel some sense of social obligation to favour the disabled person.

  3. Jonathan Ward says:

    I think Julian is right in that if a candidate is able to do the job and able to do so to the same standard as anyone else, then why should they be paid less? Otherwise it’s plain discrimination.

    It’s not just the media in these cases that are ‘stirring things up’, but actually a lot of people care deeply about these issues and find in cases such as with Mr Davies that the argument has been poorly put to say the very least.

    How would a lower wage help someone who is being discriminated against? If they couldn’t do the job adequately because of either the physical demands or because the employer had not provided the possibility of any equal opportunities, then they still wouldn’t get the job by knocking £1 or £2 of their wage. If they could do the job, then they should be expected to be treated equally in their reparation. It’s what you do that you are paid for, not who you are. If someone makes a contribution, pay them the worth.

    My Davies’ suggestion could easily lead to the exploitation of people with disabilities, or simply leave discrimination un-tackled and creating a discourse that in the economy and society that suggests such people are second class citizens.

    Your arguments on the wages in a developing nation as a whole don’t correspond to this argument on citizens within the same society.

    • OF COURSE if they can do the same job to the same level they should be paid the same. The question is whether people who — for any reason — can do the job a little less well, should be able, or not able, to price themselves into the market. Jonathan, you illustrate my point that the moment one raises sensitive issues, those making comments also make a whole range of assumptions which are entirely unwarranted by the original argument.

      • Jonathan Ward says:

        Yes, but I think others, and I argue that if someone is supposedly doing a job less well, then what are the margins below the minimum wage at which that becomes profitable for the employer (in their view, which may not be a fair view)? Is it going to be anywhere near a living wage, otherwise, as Julian points out, they will need to be supported by benefits.

        Also, let’s say this goes ahead, what is the impact upon other wage levels. Let’s say there are people willing to work under the minimum wage to price themselves into the market. This would then price out others from the market and exhibit a downwards pressure, creating a backlash from others who have been either displaced or overlooked for jobs, or from those experiencing wage stagnation or reduction.

        I just don’t think the idea is well thought through, and whilst it may may be a sensitive issue, I find the whole concept to miss the point of having a minimum wage and equal opportunities. It does deal with the real issues I believe of opening access to employment and reducing discrimination. The onus is on society and employers still for me.

  4. Roger the Dodger says:

    This is one of those really difficult issues. On one hand Phillip is making absolute sense, and in any case the disabled person would receive benefits to bring their wages up to a “risible” level.

    The problem’s are two fold, one is the obvious assault on the wages of the disabled, the other is the more subtle deflationary pressure such a move would inevitable bring with it. With the world economy sluggish and the British economy seemingly even more so, this could quickly get out of hand.

    Frankly Roger you would be a fool to get sucked into this debate, as the potential for your fingers to get burnt are high. If the days of a working wage are over, then it is quite likely that Capitalism will shortly follow the path of other Empires that have grown large only to fail seemingly overnight. When pay, pay, pay becomes default default default world war is certainly the next great game to play

  5. Derek says:

    I would argue that the state has no business in setting a minimum wage in the first place, or if they do it should be possible for any employee to opt out. At the top end employers are willing to pay a premium to attract the brightest and best employees, so why shouldn’t an employee be able to offer a discount in order to make his chance of getting a job better? The argument about this leading to extra benefits being claimed is more of a criticism of the over-generous benefits system.

    The more we feather-bed our society the less competitive we become and the worse will be the long-term outcome for the country.

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