The minimum wage is hurting the worst off
There is every chance that the last Labour government will not be treated kindly by history. The legacy of Blair and Brown, in all likelihood, will be seen as one of a broken society and a broken economy.
Yet one of the most serious travesties of those 13 years has perhaps not been given the attention it deserves. With the latest unemployment figures showing that 16-25 year olds make up almost 40 percent of Britain’s jobless population - and the manifestation of a so-called ‘lost generation’ of NEETs (not in education, employment or training) – it is arguable that Labour’s failure of young people is their most unforgivable crime.
The Sunday Telegraph reported this week that ministers have been warned by government pay advisors that the minimum wage is pricing young people out of work. The latest increases mean that 16-17 year olds must be paid a minimum of £3.68 per hour, with 18-20 year olds being paid at least £4.98. These figures may not seem like much, but they are costing a generation of young people their futures.
Tim Butcher, the Low Pay Commission’s chief economist, told the Telegraph that the ‘minimum wage effect’ has forced businesses into cutting jobs for young and inexperienced workers. Free-market economists have been saying this for years. In austere times firms are less able to recruit young employees – whose jobs may well have been saved by lower market-priced wages – due to the minimum wage rendering them unaffordable.
The minimum wage is often cited by the left as a rare example of how state intervention in the economy can be a force for good; it prevents the exploitation of workers by a free market that drives wages down and serves only the interests of employers, so they say.
But in reality the youth minimum wage is hurting the very people it set out to protect. By pricing them out of employment in the infancy of their working lives it has contributed to a generation of young people hooked on state handouts and with few prospects for the future. The key question is this: between lower pay and an abject inability to work, which is the greater evil?
The minimum wage for young people quite possibly has its heart in the right place; it just simply does not work from an economic perspective. David Cameron says he plans to ‘fire up the engines of the British economy’ and wants to focus on the plight of the young people. It may seem perverse, but cutting the minimum wage might just be the way to do that.