Minimum wage set to rise in Britain -- and Conservatives are (surprisingly) all for it

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LONDON -- The Great Recession has not been good to Rochelle Monte. A home health aide, the 38-year-old mother of three has been squeezed by ever-rising food and transportation costs, even as her minimum-wage salary has barely budged.

But Ms. Monte will probably get a raise this year, thanks in part to an unlikely advocate: Britain's ruling Conservative Party.

While Britain's other major parties agree with the need for a minimum wage hike, it is Conservative support that is most surprising. Just 15 years ago, Conservatives vigorously opposed the very creation of a minimum wage. Just last autumn, they balked at pleas for a substantial increase.

But this month, the nation's top economic official -- known as the austerity chancellor for his cheerless calls to cut budgets and benefits -- startled the political establishment by declaring that it is time to spread the wealth.

The announcement reflected the unusual consensus developing in Britain over how to distribute the spoils of the economic recovery. It also highlighted the stark contrast with the United States, where there's a similar conversation over economic fairness -- but on very different terms.

The United States and Britain are emerging from the wreckage of the Great Recession on parallel trajectories. In both countries, unemployment is falling even as wages continue to stagnate and the gap between rich and poor widens.

An increase in the minimum wage is not yet a done deal in Britain, with an independent panel that plays a critical role in the process expected to weigh in this month. But analysts say it's overwhelmingly likely now that all the major parties have lined up in favor.

"Especially as the economy is starting to pick up, there's a quite serious concern on both the left and the right that the benefits of the recovery be broadly shared," said James Plunkett, policy director for the Resolution Foundation, a London-based think tank that advocates for those living on low and middle incomes. "Most people agree that if incomes don't rise at the bottom, there are going to be problems."

Unlike in the United States, where the minimum wage has been a mainstay since the Great Depression, it's a relatively new innovation in Britain -- a 1999 outgrowth of the dot-com boom. Once hugely controversial, it has been widely embraced in recent years. Still, Conservative backing for a substantial increase in the wage marked a significant turnabout, and analysts say it had roots in both economics and politics.

In announcing the government's decision, Chancellor of the Exchequer George Osborne focused on the former, trumpeting the nation's falling deficit and rising GDP. "I think Britain can afford a higher minimum wage," Mr. Osborne told the BBC. "We have worked hard to get to this point, and we can start to enjoy the fruits of all that hard work."

Analysts say an increase in the minimum wage would give Conservatives the opportunity to reward and encourage work -- while possibly reducing the amount of tax benefits offered to the working poor.

And yet, the potential political benefits are no less a factor. With elections a little over a year away, the parties have been competing to claim credit on not just the minimum wage, but on other proposals to put money into people's pockets by cutting their tax, energy and mobile phone bills.

Politicians with the opposition Labour Party have been warning for months of a "cost-of-living crisis" in Britain and are expected to make the issue the focus of their campaign. Mr. Osborne's announcement was seen here as a maneuver that co-opts Labour's argument -- at least in part.

"Imitation is the best form of flattery," said Chris Leslie, a senior parliamentarian with Labour, which along with the Liberal Democrats has long favored raising the minimum wage. "When you look back at the past 20 years, it is quite a remarkable shift for Conservatives to not only accept the concept of a minimum wage, but also to advocate an increase."

But Mr. Leslie and other government critics say it's not enough. The major parties may agree on the minimum wage, but they are still far apart on other fiscal issues, with Labor supporting higher taxes on the wealthy and the Tories pushing for more cuts in welfare payments to those at the low end, including the unemployed.

Workers in Britain have been hammered during the recession, with average wages falling in real terms as costs have surged. The minimum wage, which is now set at 6.31 pounds an hour, or a little over $10, has risen slightly in recent years, but its actual value has fallen well below what it was worth in 2008, when financial markets crashed.

In Mr. Osborne's comments last month, he suggested that he wants to see the wage rise to seven pounds by next year, or about a 10 percent hike. Experts say such a significant increase could have a big impact on the labor market in Britain -- and not just for the 1.4 million workers who earn the minimum. Millions more workers could also see their wages rise as employers seek to keep pace with a rising pay floor.

"That would be a very large increase at a time when average incomes aren't going up much at all," said Alan Manning, a professor at the London School of Economics who studies the minimum wage. "It really would be a leap into the unknown."

Businesses have warned that such a rapid rise could cause them to pull back on hiring, cut hours or both.

"It's important that we protect workers at the low end of the labor market. It's just as important that we don't push people out of work," said Neil Carberry, employment director of the CBI, a business lobby.

That argument still holds sway for many in the Conservative Party, and Tories remain divided over Mr. Osborne's call for a hike. But there's been no major backlash on the right, in part because all eyes are now on the Low Pay Commission -- the independent panel of nine experts that has earned widespread respect for its annual recommendations on whether and how to increase the minimum wage.

The panel -- whose members include representatives from academia, business and labor -- will issue its recommendations to the government next month, and the government will announce any pay increase in the spring.

Whatever the government decides, Ms. Monte, the home health aide, said it won't be enough to cover her rising costs. Employed for 20 years, she said the last few have been among the toughest as prices have surged.

"It's nearly 10 pounds for a chicken! How did that happen?" said Ms. Monte, who lives in the northern English city of Newcastle. "It's just a nightmare. I spend my life rooting around bargain basements looking for the cheapest food because it's so expensive just to live now."



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