Andy Burnham's very strange £11 minimum wage


Gosh, isn't Andy Burnham showing himself to be a strong leader?

Firms have been warned by Andy Burnham that they could face penalties including higher national insurance payments if they failed to pay a proposed new higher living wage of around £11 an hour. In a fresh push to make up ground on surprise left-wing Labour leadership frontrunner Jeremy Corbyn, the shadow health secretary said he would seek to use a "carrot and stick" approach to force up wages if he led the party to power in 2020. At the start of the final 10 days of campaigning, Mr Burnham will set out his proposals at a campaign event in Pudsey, a Yorkshire constituency that Labour failed to win at May's general election. The national rate - which would rise to over £12 in London - would apply to all age groups and be adjusted for the loss of tax credits and linked to the cost of housing, food and household items.

Such a strong leader that he can simply divine the price of something and 65 million people and the markets that are their interaction will simply buckle under and obey. Sadly for such price fixing games that's not in fact how things work.

More specifically, the level of the minimum wage has an impact upon how many people actually have jobs to earn a wage from. It's entirely true that low minimum wages have little effect on employment: simply because very few people earn very low wages. The higher that minimum is compared to the general wage level the greater the unemployment effect. There's no cut and dried limit here, but the rule of thumb is that a minimum wage higher than 50% of the median will have substantial such unemployment effects.

Currently the median wage is around £13 an hour meaning that the proposed £11 is around 85% of that median.

This isn't going to work out well, is it?

"It will be based on the simple principle that the same hour's work deserves the same hour's pay, regardless of your age. So I will abolish the youth rate minimum wage, apply the higher rate to everyone and give incentives for companies to go even further."

And there is where the real effects will be felt. For those the minimum wage is most binding upon are those who are young and untrained. And if someone fresh off the educational production line must be paid that same £11 an hour as someone with a decade of experience of turning up to work on time and sober then that teenager just isn't going to get employed is she?

We thus return to our long stated position. Which is that if we are going to have a minimum wage, something we don't think should exist at all, then whatever that minimum wage is must be the same as the tax free allowance for both income tax and national insurance. For if there is, as is claimed, some moral amount that an hour's work is worth then there can be no justification for the state taking some of that amount to pay Andy Burnham's salary.

Or, if you prefer, if you'd like the working poor to have more money then stop taxing them so damn much.