Sam Bowman, Deputy Director at the Adam Smith Institute, has written an article for the International Business Times on how the Conservative Party’s flagship ‘living wage’ policy is is a magic money tree policy itself.
The chancellor’s logic is this: working tax credits “subsidise” firms by allowing them to pay their workers less. Reduce the subsidy, and raise the minimum wage, and firms will be forced to pay their workers more. The government spends less and firms spend more, and workers don’t feel the difference.
Virtually none of this is true. Tax credits do not subsidise firms, raising the minimum wage does not magic more money from firms to workers and even if it did it would hardly offset the tax credit cuts at all.
Read the full article here.