Thoughts on politics and life from a liberal perspective

Tuesday, 2 April 2013

Freezing or reducing the minimum wage would be economically wrong-headed

So there are rumblings that the government is planning to freeze or perhaps even reduce the minimum wage for those over 21 years of age. This would be completely wrong-headed for at least three reasons.

Most importantly it is simply not fair to penalise those who earn the least (which by definition are those earning the national minimum wage). They are the so called "strivers" that George Osborne keeps banging on about. Surely this government should want to protect them rather than see their real-terms salary fall?

But if that's too wishy-washy namby-pamby sandal-eating muesli-wearing for you then here are a couple of economic reasons for you.

If salaries are reduced then benefit claims will increase. The government will simply be shifting the burden from the private sector to the taxpayer and hence helping to further subsidise companies that should be paying their staff more not less. If anything this will make the deficit even worse.

Also those earning the least are the most likely to spend what they get. This is exactly what you need to boost growth and hence the mooted policy is the exact opposite of what the country requires.

I hope this is just bank-holiday flag flying. I also hope that Lib Dem ministers will have nothing to do with this mean-spirited and economically dubious nonsense.


Anonymous said...

The question that should always be asked is...

How many people are put out of work/denied a new job when with every X increase in the minimum wage.

Without at least an attempt to answer that question, it's all just pissing in the wind grandstanding

Anonymous said...

so, but the previous commenters logic: one CEO salary of £4.8m puts 400 minimum wagers out of work. And their pay rise in the last year was responsible for 133 of those jobs.