Today is also the tenth anniversary of the minimum wage, introduced by Tony Blair. Economic studies show that a minimum wage almost always leads to more unemployment, although this is denied by its supporters.
The problem is the level at which you set it. As from October this year it will be £5.73 per hour. Now, clearly, if it were £57.30, millions of workers would be laid off. Companies just couldn't pay it. If, by contrast it were £0.57 an hour it wouldn’t be of any help to anyone. The government has to set it where it brings some nominal enhancement to someone but causes as little damage to the economy as possible. It is a political patch up.
As things stand, if a business can afford to pay its workers only £5, and there are workers willing to work for that rate, it has to go underground, and when that happens fewer taxes are paid and training, safety procedures and so on are neglected. Some will remember the tragic case of the migrant workers drowned collecting cockles in Morecambe Bay a while back. The cockle business can’t pay as much as the minimum wage so it hires illegal immigrants and ignores their safety. Without the minimum wage those workers might still be alive today.
There is only one area in which I would support a minimum wage: if it were paid by the government. Everyone gets a minimum, and if you earn more than that the government pays you (‘negative income tax’) and if you earn more you pay taxes to the government. It could have to be tweaked a little to provide some incentives to work at the margin but it would simplify and reform the tax system, to everyone’s benefit. And the government would no longer be poking its nose into labour contracts entered into freely by both sides.
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