Consequences of a bidding war over the minimum wage could be very grim, says IEA
Len Shackleton responds to Labour plans to raise the minimum wage
Responding to reports that the Labour Party plan to include under-18s in their proposal to raise the minimum wage to £10 per hour, Professor Len Shackleton, Editorial Research Fellow at the Institute of Economic Affairs said:
“The Low Pay Commission has provided valuable advice to successive governments for the last twenty years. It has helped ensure that the National Minimum Wage system has allowed a gradual increase in pay without significant job losses. However it should now be scrapped, as both main parties have clearly signalled that they no longer need it and prefer to pluck pay increases out of the air.
“Rather than considering the evidence of labour market conditions, George Osborne chose to introduce the new top rate, the National Living Wage, without consultation and Philip Hammond went further, appointing Professor Arindrajit Dube to provide a rationale for sharply increasing the NLW. It is rumoured he wants to increase it to 66% of the median hourly rate, creating one of the highest minimum wages in the world.
“Not to be outdone by the government on this issue, the Labour Party wants to push it even higher – to £10 per hour – and pay under-18s the same rate. This would mean doubling the pay of young people who understandably have fewer skills and less experience than older colleagues. Such a rate hike could raise youth unemployment to levels comparable with those in continental Europe.
“The possible dangers of a political bidding war over minimum wages have been highlighted time and time again. Now it looks like we have it, and the consequences for employment are likely to be grim.”
Notes to editors:
For related IEA research on the labour market and the minimum wage, click here.
The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problfems and seeks to provide analysis in order to improve the public understanding of economics.
The IEA is a registered educational charity and independent of all political parties.
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