Comments made by Welfare Minister Lord Freud have created a bit of a storm today after being raised at Prime Minister’s Questions by Labour leader Ed Miliband. Freud was recorded saying:
“You make a really good point about the disabled. There is a group where actually, as you say, they’re not worth the full wage.”
At the risk of incurring the wrath of my fellow lefties, I’m going to defend Lord Freud’s remarks while still disagreeing with the argument I think he was trying to make. I say think because what he actually said was pretty clumsy, and could easily be interpreted as offensive when viewed a certain way. So what do I think he was saying then?
It seems to me he was making a case argued by most opponents of the minimum wage. The argument uses what economists call marginal productivity of labour. This goes that firms will hire additional workers up to the point where the costs of paying the worker a wage is equal to the additional output they will achieve by hiring the worker. So if a worker can produce 5 widgets an hour, but only costs the equivalent of 4 widgets an hour, they will be hired, but a worker who costs 4 widgets but can only produce 3 won’t be. If the workers was willing to work for the monetary equivalent of 2 widgets though, the firm would hire them. If the minimum wage is set at the equivalent of 4 widgets however, this worker who can only produce 3 widgets an hour will be left unemployed.
So Freud is saying some people (in this case some disabled people) are not productive enough to produce enough to be ‘worth’ the minimum wage. This is probably true in many jobs, and I’m not just talking about seriously disabled people here, but also those who have been unemployed long term and/or are recovering from drug or alcohol problems. In economic terms this seems a rather uncontroversial thing to say and one that – despite what they may say today – most Conservative MPs would agree with. So where I would defend Lord Freud is to the extent that he was only (rather clumsily) expressing a very commonly held belief.
But is he right though? I’ve already said that I agree there are some people who employers will view as not worth paying the minimum wage to. They could be right or wrong about this, but there is no doubt employers do not like to hire the long term unemployed, and discrimination on the grounds of disability remains a real thing. But those in agreement would argue that if there were no minimum wage restrictions, employers would hire those workers if they were willing to accept a low enough wage. This is where I disagree quite strongly. People with more business experience than me may say I’m wrong here, but I don’t believe employers make hiring decisions based on the marginal productivity of labour. I think they will always try to hire the best candidate at whatever is the prevailing wage rate. For evidence I would cite the almost total failure of Nick Clegg’s Youth Contract, which provided a wage subsidy to firms hiring an unemployed young person. Take up was atrocious.
Freud’s instinct (which he half expressed) was to favour an exemption from the minimum wage for certain groups, and to top up their wages with universal credit. To the extent that it was limited to certain groups, it would likely be ineffective as the Youth Contract demonstrated. I would also be suspicious that that was just the start, and that a complete removal of the minimum wage would be on the cards leading to a race to the bottom.
A further objection would be Freud’s implicit assumption that because the private sector won’t hire certain people at the current wage, it’s OK for them to pay those people whatever they think they are worth. But businesses are there to serve us, not the other way around. The floor on wages should be the amount at which a person is able to afford a decent standard of living. If the private sector cannot or will not hire everybody for at least that wage, then the government should act as an employer of last resort and tailor make jobs to each individuals talents.
For disabled people, previous governments have felt the need to create organisations like Remploy to create employment for those who struggle to find private sector work. This government scrapped a lot of Remploy factories, and few of those losing their jobs managed to find another one. It seems to me organisations like Remploy are more likely to be more at providing decent jobs for disabled people than scrapping the minimum wage ever would.
alittleecon 
Nothing less than the sack for the evil minded.
Do you have a disabled child?
As the mother of a learning disabled daughter, I would have no reservation of my daughter being paid below minimum wage, it is about her self esteem and being accepted in society! It pisses me off when people who have no idea want to be so bloody political correct! Walk a mole in my shoes, then your opinion may count!
As a disabled person I would strongly disagree. I worked for many years in highly paid, highly productive work. I have a PhD, and severe arthritis, and had workplace adaptations.
What you are asking for your learning-disabled daughter is not work, but support in the community. I fully support the integration of the learning disabled into all aspects of community including the workplace. I know a family with a learning disabled daughter, who was found full time work (by the vicar) in a cake shop. She is paid full wages, but doesn”t use the till. She was happy, and settled, and independent as possible. It was an adaptation to the work that made it possible.
I see your view, but it will be used to lump me & your daughter together and make us all into a homogeneous group that is worth-less. Because I think that if your daughter contributes she should be valued for that. Because now it has been said by Freud, I am now worth-less, too. The argument put above by the author has also skated pretty close to that edge too, because people cannot understand the diversity of the group in receipt of disability and sickness benefits. That’s unacceptable, it’s the thin edge of the wedge.
I don’t see any difference between what you wrote and what I wrote. You me and David Freud all agree there are some people that employers don’t value enough to offer them a job at the minimum wage. David Freud thinks this means we should allow firms to employ severely disabled people at less than minimum wage. I (and you I think) don’t agree and think everyone should be paid at least the minimum wage (which I would like increased significantly).
We do agree mostly. You have given an honest appraisal in your own context, pros & cons, widely held beliefs etc, favouring the retention of minimum or statutory wage.. You admit your analysis is based in what you thought he was trying to say. Freud was not discussing that, though. Freud’s position, stated in a white paper (2009), is that there should be no “state subsidy” (benefits) for anyone without an element of work, no exemptions. Bottom line – work must be done by all for benefits, and no benefits for those completely unable to work..
This is not displaying “widely held beliefs”. about disability and performance in the workplace. It is the mind-set of those who created poor laws, the work-house inmates making “money for old rope”, prisoners on tread-mills in the 19thC, and benefit sanctions in the 21stC, and the bio-psycho-social model WCA for disabled to find them all “fit for work”.
It is about monetising and defining a persons’ value – or being worth-less – where the only consideration is their role in the industrial / commercial value chain. The disabled/ill/ elderly become “damaged goods” to be forced to labour however menial, practically auctioning them off to anyone willing to offer a pound an hour. It’s not about helping people back to work, or marginal productivity.
It serves little value imho trying to tease out the logical bits that may lurk there, however well considered. Having the debate on the ground chosen by the apologists for Freud gives an air of false respectability to avoid further scrutiny. The same falsehood of “1984 speak” of “fairness” while making the poor destitute, that workfare is of value to the claimant, not the employer who gets many hours of labour for nothing, and being “fair” to the “taxpayer”. All are arrant nonsense to support neo-lib economics.
The welfare state exists to provide dignity and value to those the capitalist and commercial systems ascribe no value, not to provide free labour for exploitation of the vulnerable. Welfare is anathema to Freud, and yet he is minster for the disabled.
So I do have a fundamental disagreement with your analysis (not your values) because it avoids confronting the Freud ideology that our ONLY value is to be used by capitalism in the profit-making value chain, even us “worth-less disabled”, and consequent sub-human pay endorsed by the state subsidy. By substituting our opinion (not Freud’s words) that the debate is about who sets the “going rate”, we are in danger of not seeing the underlying ideology that as humans we can be judged to have different worth, by the likes of Freud, IDS, Cameron et al.
The problem is Clare that is a selfish attitude. By saying its ok for me or my daughter to get less than the minimum wage you undermine the very principle of the minimum wage for everybody and support the chase to the bottom.
What you are doing there is strike breaking. Crossing the picket line.
This divide and conquer individualism is precisely why we are all in a pickle. Only when we stand together can we face down the power of corporatism. Corporates are over the moon when we all act like ‘I want’ toddlers. It enhances their power.
Stand together though all as one and they have no power at all.
The correct answer is a Job Guarantee where everybody can get a job at a living wage if they want one – simply by turning up at the JG office and asking for it.
That is what we should be demanding, not crumbs off the corporate table.
I will point out again that Freud was only suggesting using what already exists and moving disabled people into one of the other categories of minimum wage.
People seem to forget that those under 21 get less than the full minimum wage already as a matter of law.
Funny that there are no pitchforks raised and very little oil boiled for the disadvantaged youth. Perhaps they are just too spotty or something.
Reblogged this on TheCritique Archives and commented:
What Freud said wasn’t quite as bad as some people have made out, but it still amounts to saying that employers should only pay the minimum wage when they really feel like it.