Consequences of a bidding war over the minimum wage could be very grim, says IEA
Christopher Snowdon comments on new study in The Lancet
IEA report encourages more competition in health & social care systems
Len Shackleton responds to Labour plans to raise the minimum wage
“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.”
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For related IEA research on the labour market and the minimum wage, click here.
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