£8 minimum wage hype: political trick, economic disaster, moral outrage

Britain’s Labour Party leader Ed Miliband says that a Labour government would boost the national minimum wage to £8 an hour, an increase of about £60 per week, by 2020. He says the UK economy is booming, and the low-paid should get a bigger share of it.

Actually, at present rates of growth, the minimum wage will be close to £8 in 2020 anyway, so this is a one of those political sensations that doesn’t amount to much. Even so, it is foolhardy now to commit UK businesses to pay any specific figure in 2020, since anything could happen in the meantime.

The minimum wage gets unthinking politicians (and not just Labour leaders) dewy-eyed. ‘We can’t have people being paid a wage that isn’t enough to live on.’ ‘Businesses should pay their workers more, and take less profit.’ ‘The minimum wage hasn’t killed jobs as the doomsayers say.’ You know the story.

In fact, high minimum wages do destroy jobs. in particular, they destroy those starter jobs, the low-paid, temporary jobs that once gave young people their first step on the jobs ladder – pumping petrol (as I did), stacking bags in supermarkets, ushering people to their seats at the flicks. Now those jobs don’t exist, because they are not worth the minimum wage (plus all the National Insurance and the burden of workplace regulation that goes with them – a particular burden on small firms). So we have a million young people out of work.

As for profit, try using that argument on anyone running a small business, already weighed down by taxes, rates, and regulation. Often they are getting less than their lowest-paid employees, and working longer hours for it Higher minimum wages mean they can afford to employ fewer people, or provide less generous perks and conditions.

I don’t want to live in a country where people can’t afford to live on what they take home either. That is why we have a welfare system, to top up the earnings of the lowest paid. We need a negative income tax – above the line, you pay tax, below the line, you get cash benefits – structured so that you are always better off in work than out of it. A paying job, even a low-paid job, is the best welfare system the human mind can devise.

And we must take low-paid people out of tax and national insurance entirely. Then more small firms could afford to take on more low-skilled workers and give them that first step on the jobs ladder.

If we could simply vote ourselves higher pay, why stop at £8? Why not fix the minimum wage at £800 an hour. The answer is obvious. The only people who would be worth that amount to anyone would be a few Premier League footballers, rock stars, investment bankers and high-class hookers. The rest of us would be out of a job.

The minimum wage does no harm to people who are already earning it, though it does them no good either. But it does positive harm to those earning less, or those who cannot get a job at all. The former will be let go, or will have to endure worse conditions; the latter will find it very much harder to get a job. And all that, of course, has already happened.

Learning from history

In the Keystone Cops comedy that is the contending parties in the Scottish Independence referendum campaign, it seems that the Scottish No team have been making all the same mistakes that Canada’s No team made on Quebec independence back in 1995.

True, the Quebec referendum campaign ended in a narrow No decision – but so narrow that it kept the independence issue alive and grumbling. Next week’s Scottish referendum has become too close to call, but most polls are predicting a No majority – though again, one so narrow that it keeps the independence issue alive and grumbling here too.

It seems the No team have learnt nothing from Canada’s experience of nearly twenty years ago. Andrew Coyne of the National Post lists the similarities:

  • The same early complacency in the No camp.
  • The same unbridled panic as the Yes side surged in the polls.
  • The same unappealing mix of threats and dubious accounting claims.
  • The same blurring of the issues (devo-max, keeping the currency).
  • A charismatic Yes leader and a seemingly distant No Prime Minister.

As in Canada, says Coyne, an unwarranted legitimacy was conferred on the separatist project; then came attempts to pacify it with more powers and more money, only to see it grow more ravenous in response. And once again,  a Yes vote is probably forever, while a No vote just marks the start of fresh campaigning.

It all looks like one of the slow-motion car crash in those early comedies. Except this particular farce is deciding the UK’s future political and economic reality.

No, Boris – we are never guilty until proven innocent

The proximity of the 800th anniversary of Magna Carta next year makes Boris Johnson’s Telegraph column from Sunday even more shocking. His plan to arrest anyone who travels to Syria or Iraq without ‘good reason’ utterly abandons the presumption of innocence. Instead, all travelers would be presumed guilty – and guilty of the extremely serious charge of terrorism – unless they could somehow convince ‘the authorities’ otherwise:

We also need to be far more effective in preventing British and other foreigners from getting out there…We need to make it crystal clear that you will be arrested if you go out to Syria or Iraq without a good reason. At present the police are finding it very difficult to stop people from simply flying out via Germany, crossing the border, doing their ghastly jihadi tourism, and coming back. The police can and do interview the returnees, but it is hard to press charges without evidence. The law needs a swift and minor change so that there is a “rebuttable presumption” that all those visiting war areas without notifying the authorities have done so for a terrorist purpose.

Boris of course has the laudable aim of curbing the jihadists. But that is just the sort of ambition that has excused too many careless erosions of our ancient freedoms. Already he calls for the return of control orders and laments how hard it is to press charges against British citizens without evidence; as if the assumption of innocence until proven otherwise has not acted as the ultimate safe-guard of citizens against radicals throughout modern history.

According to the Mayor, such controls and assumptions need merely a ‘swift and minor’ change in the law. Are our Magna Carta liberties to be so swiftly and so triflingly abandoned?

Green belt is the reason for rabbit hutch UK

A Cambridge University study has claimed millions of people are living in homes that are too small for them, and the poorest are being hardest hit, what the academics call ‘rabbit hutch’ Britain.

The academics at Cambridge should know. It is one of those towns, forty miles from Central London, that is booming as a result of London’s suffocating ‘green belt’. London house prices have been soaring, and people who work in the capital have been forced to find homes further and further away. They blame foreign property buyers, or even the government’s Help to Buy schemes, for the surge in prices. But that is only part of the story. The fact is that London, like many other cities in the UK, is not building enough houses. To meet the demand, the UK would have to build around 260,000 houses each year. Last year, it built just 110,000. And, like the national debt, that deficit has been stoking up housing pressure for at least the last thirty years.

It is near-impossible to build houses to meet that demand hangover. The green belts, announced in the Town and County Planning Act of 1947 and introduced in the early 1950s, were supposed to be slim areas of woodland and farmland surrounding our cities. The idea was to stop ‘urban sprawl’ and to give city dwellers some nice countryside nearby that they could enjoy. The farmland, however, has become industrial farmland, more like the prairies of the MidWest rather than the bucolic idyll of Olde England, and quite inaccessible to the public. Meanwhile this so-called ‘green’ belt has been extended further and further as people living in it or near it campaign to stop development near them – which, if successful, means that their home rises in value because of the huge unfulfilled demand. So 73% of Surrey, near London, is now green belt, and the few houses their command huge premium values, as do those in the other Home Counties. In the cities themselves, space has become so valuable that homes have indeed become rabbit hutches.

As Paul Cheshire, Professor of Economic Geography at the London School of Economics (and a recent speaker at the Adam Smith Institute) points out, greenbelts are a form of discriminatory zoning. They deliver no real benefit to a poor child in Haringey, five miles away from the green belt. But they do deliver benefit to the stockbroker-belt residents, keeping the urban unwashed and their housing out of their backyard.

The Adam Smith Institute has suggested that 800,000 new homes could be built around the capital by shaving just half a mile off each boundary of the London green belt. Politically, of course, that is difficult. Every homeowner in London, and particularly those around the green belt, have an interest in keeping the supply restricted. Cheshire has another suggestion. Because of the green belt restrictions, if you can get planning permission on a piece of land, its value soars. Cheshire would simply say that when that premium reaches a certain level, it is obvious that the market is telling you something. And where the premium is highest, that is where we should release land for new building.

Liberalism day

Today is Liberalism Day. It’s the day when we snatch the word ‘liberalism’ back from the American left, who on most economic matters at least are anything but liberal.

Genuine ‘liberalism’ developed in the seventeenth and eighteenth centuries, under the guidance of philosophers like John Locke and Adam Smith, and flourished in the nineteenth century, guided by yet other philosophers like John Stuart Mill, not to mention a clutch of enlightened politicians.

The early liberals – the Old Liberals or Classical Liberals as they are called – thought that economic activity in free competitive markets was an important part of freedom in general. The key feature of liberalism is the presumption of liberty: there may well be good reasons for curbing people’s freedom in various cases, but the onus is on those advocating the curb to justify it.

If only our politicians today would begin with such a presumption – instead of presuming that they have the solution to everything.