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Proposals for a living wage are well-intentioned, but ultimately misguided

Commenting on yesterday's living wage proposals, Mark Littlewood, Director General of the Institute of Economic Affairs, said:

“The so-called living wage may do more harm than good. Highly successful, blue chip companies may well be able to sign up to the scheme fairly effortlessly. Public authorities can also do so and simply pass the bill on to the taxpayer. There is, however, a danger that naming and shaming companies unable to meet higher wages will depress job creation particularly in the poorer parts of the UK.

“If an entrepreneur in, say, Middlesbrough believes he can create 500 new jobs at £7 per hour but concludes that paying any more than this would not make his business viable, should senior politicians name and shame him for creating these jobs at below the centrally agreed living wage rate? No. He should be applauded for doing so.

“Regional disparities in the cost of living are also glossed over by those arguing for the living wage. London is singled out for special treatment, but it is assumed that there are no differences between Bradford and Bath or between Winchester and Wolverhampton. This is evidently absurd.”

Notes to editors

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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 problems.

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