Conservative MP Philip Davies has been widely criticized today for saying that the minimum wage hurts disabled workers. His argument is that employers prejudiced against disabled people are less likely to hire them for a job over a rival applicant, other things being equal. This prejudice is unacceptable and we should fight it. But it is impossible to deny that it exists and harms some of the most vulnerable members of society. Minimum wage laws make this harm even worse.
If you impose a price floor above the market price for something, you will usually end up with a surplus that can’t be sold. That’s true of labour too, and a major meta-study of minimum wage papers supports this. The argument usually made against this is that the market for low-skilled labour is a monopsony – in other words, that individual firms can set the wages of the people they hire without competition from other firms driving that upwards. There is very little evidence that this theory applies in Britain today. Some say that the price of low-skilled labour is elastic. The tight margins and high labour costs of most SMEs are good refutations of this claim.
Other groups of people disproportionately excluded from employment by minimum wage laws include young people and immigrants. Anybody who is seen – however wrongly – as a risk or additional cost to an employer will find it harder to get a job than someone of equal abilities who is not seen as being an additional cost. This is bad and wrong, and we should try to stop it, but it is reality. If we pretend that it isn’t, and make policies that ignore reality, then we will make things even worse for victims of prejudice. Perversely, people who dismiss the downside of minimum wage laws are doing the greatest disservice to the disabled, because they ignore the unjust reality of employment prejudice in favour of a utopian policy that does real harm.
Davies was wrong to suggest that disabled people alone should be excluded from minimum wage laws. (If that is indeed what he said: though it is being widely reported that Davies said that the disabled "should offer to work below minimum wage", I cannot find that comment anywhere on the Hansard website. Has he been misquoted?)
In any case, partial exclusion for the disabled would be a poor solution. Critics have been right to point out that to exclude them would be a tacit acceptance of employment prejudice. But minimum wages do price people out of work, and disproportionately affect people who are wrongly discriminated against. To stop this, the minimum wage should be abolished or voluntarized for everybody, not just a select few.
Prejudice against the disabled exists and negatively affects their employment opportunities. It should be resisted by all peaceful means available, like boycotts of prejudicial firms and other firms that do business with them. These methods have proved to be remarkably successful in the past. But they will not work overnight. Government policies should be based in the real world and seek to do as little harm as possible. Policies created for a world that we aspire to, in which there is no prejudice, can have very negative real effects when applied to the world in which we do live, where there is prejudice. However much we aspire to the ought, we cannot escape the is.