Press Release: The gender pay gap is a myth

For further comments or to arrange an interview, contact Kate Andrews, Head of Communications, at kate@adamsmith.org | 07584 778207. Commenting on David Cameron's announcement to make businesses with 250+ employees publish their pay gap figures, Head of Communications at the Adam Smith Institute Kate Andrews said:

It’s a sad state of affairs when even the Prime Minister is promoting the gender pay gap myth. According to the ONS, women between the ages of 22 – 39 working more than 30 hours a week earn, on average, more than their male counterparts.

Forcing business with more than 250 employees to publish their ‘pay gaps’ will only promote more myths and confusion. There is no such thing as an ‘average salary’; education, previous experiences, negotiating tactics, and unique abilities all contribute to one’s salary, none of which can be known by comparing John and Jane’s annual take-home pay on a spreadsheet.

Furthermore, men and women often choose to make difference career decisions – usually based on flexibility and rigor – so they can embrace other, equally meaningful parts of their life; this, naturally, can be reflected in their pay.

The Prime Minster’s claim that the implementation of the National Living Wage will primarily help women in lower paid jobs is a weak justification for another recent policy faux pas. It is women, particularly who are less-skilled or less-educated, who are most likely to be part of the 60,000 who are estimated by the OBR to be cut by their employers when they are unable to afford this wage increase.

FTSE 100 companies have met the proposed target for 25% female board members not because the government told them to, but because women, through their own abilities and determination, are thriving in the work place more than ever before. But leave it to the government to try to usurp their achievements.

Notes to editors:

For further comments or to arrange an interview, contact Kate Andrews, Head of Communications, at kate@adamsmith.org | 07584 778207.

The Adam Smith Institute is a free market, libertarian think tank based in London. It advocates classically liberal public policies to create a richer, freer world.

Ben Southwood discusses the National Living Wage on BBC Sunday Politics Scotland

Head of Research at the Adam Smith Institute Ben Southwood explained the consequences of implementing a mandatory living wage on BBC Sunday Politics Scotland.

Sam Bowman's comments on the Summer Budget in the Financial Times

Deputy Director Sam Bowman's comments on the Chancellor's latest Budget have featured in the Financial Times.

Sam Bowman of the Adam Smith Institute denounced the chancellor’s decision to impose a £7.20 minimum wage on business from April as a “disaster that will condemn tens of thousands of people to long-term unemployment”.

Mr Bowman wrote: “Almost all the most methodologically robust academic indicate that increases in the minimum wage kills jobs.”

Read the full article here.

New ASI Report: Scrap mandatory National Living Wage, slash taxes on low-earners instead

For further comments or to arrange an interview, contact Deputy Director Sam Bowman: sam@adamsmith.org | 07584 778207

• Instead of imposing a mandatory National Living Wage, the Chancellor should take minimum wage workers out of tax and National Insurance, giving workers a similar level of post-tax income while avoiding the 60,000 higher unemployment and £1.5 billion lower GDP that the Office for Budget Responsibility predicts will accompany his plans.
• Even if the minimum wage for the over-25s is increased to £9/hour under the current tax system, take home pay will be only 69p/hour above the untaxed level of the 2015 minimum wage. This difference will become even less significant considering planned increases in the minimum wage in the coming 5 years.
• Without tax, working 37.5 hours a week on the minimum wage would bring workers to within 5% of the living wage.

Instead of imposing a mandatory National Living Wage, the Chancellor should give minimum wage workers a ‘living wage’-level income by slashing taxes on low-paid workers, according to a new paper from the Adam Smith Institute.

The paper, Abolish the Poor: How raising the Income Tax and National Insurance thresholds could give everyone a living wage, shows that income tax and national insurance contributions from low-paid workers are significant causes of in-work poverty, and argues that raising these thresholds to the full-time minimum wage level would bring minimum wage workers’ incomes to within 5% (up to 32p an hour or £670 a year) of the living wage.

This would avoid the 60,000 job losses and £1.5 billion hit to GDP that the Office for Budget Responsibility predicts will accompany his plans.

Even if the minimum wage for the over-25s is increased to £9/hour under the current tax system, take home pay will be only 69p/hour above the untaxed level of the 2015 minimum wage. This difference will become even less significant considering planned increases in the minimum wage in the coming 5 years.

The paper, written by ASI Senior Fellow Tim Worstall, also illustrates that in-work benefits are not a net subsidy to employers of low-wage employees, except to the extent that they attract more people into work. Economist Jesse Rothstein found that $1 of Earned Income Tax Credit (the US tax credit) spending results in $0.74 in higher wages to the recipient. This doesn't imply an $0.26 benefit to employers, however – if wages have only fallen because more people have entered the workforce, the ‘lost’ sum may be spread among other workers.

Employer-side national insurance contributions, which tax employment, also fall partly on workers’ wages and partly on job numbers. If the government truly wants to raise wages and improve the labour market at the bottom end, it should consider reducing their rate, increasing the threshold at which they kick in, and eventually scrapping them altogether. They are a pay-destroying stealth tax on workers.

Senior Fellow at the Adam Smith Institute and author of the report, Tim Worstall, said:

If we want to kill working poverty stone dead then all we've got to do is stop taxing the working poor so much.

The simple truth is that the difference between the current minimum wage, which it is said still leaves people working full-time in poverty, and the living wage which would take all of those working full-time out of poverty, is the incredible, unconscionable, amount of taxation upon incomes that we charge to people with those low incomes. By simply raising the national insurance and income tax allowance to the full year, full-time, minimum wage we can rid ourselves of this problem.

We may or may not take those who campaign about relative poverty to heart but why not take them seriously for a moment? If that living wage is all that is needed to entirely abolish working poverty in this country then the solution is in the hands of the government. Simply stop taxing those who make low incomes. For the truth is that we do not have low wage poverty in the UK, we have tax poverty.

ASI Head of Research Ben Southwood added:

There has been a lot of bluster around tax credits—the government and others have claimed that they 'subsidise' employers. But it's more true to say that employers 'subsidise' the government by taking on low-productivity workers and reducing the benefits bill for the government to pick up. Would the government rather they were in work?

Abolish the Poor is a timely reminder that we should look at evidence before we make ad-hoc eyeball judgements. Economics is complex and surprising and we cannot jump to conclusions.

Notes to editors:

For further comments or to arrange an interview, contact Deputy Director Sam Bowman: sam@adamsmith.org | 07584 778207.

To access the full report Abolish the Poor: How raising the Income Tax and National Insurance thresholds could give everyone a living wage, click here.

The Adam Smith Institute is a free market, libertarian think tank based in London. It advocates classically liberal public policies to create a richer, freer world.

Charlotte Bowyer gives a post-Budget reaction on Sky News

Head of Digital Policy at the Adam Smith Institute, Charlotte Bowyer, spoke to Sky News about the Chancellor's emergency Budget.

ASI Budget Reaction features in The Guardian and The Herald

The Adam Smith Institute's Budget reaction has featured in The Guardian and Herald Scotland. From The Guardian:

Interestingly, the strongest opposition to the plan came from the free market thinktanks: the Adam Smith Institute and the Institute of Economic Affairs. The CBI wasn’t all that keen either. Its director general, John Cridland, said the government was getting pretty close to setting an overtly political mandate for the Low Pay Commission. “That’s not something I welcome,” he added.

Both the ASI and the IEA would have preferred Osborne to tackle the low pay issue in a different way. They would have preferred deeper spending cuts to fund bigger reductions in taxes. And they would have liked a more radical reform of the tax system, with moves towards the harmonisation of income tax and national insurance. Raising the level at which employees start to pay NI towards the level of the income tax personal allowance would, they argue, do more to help the low paid than a compulsory increase in wages that the Office for Budget Responsibility estimates will cost 60,000 jobs.

Read the full article here.

To read our reaction in the Herald Scotland, click here.

ASI Budget Reaction features in City AM and The Telegraph:

Deputy Director Sam Bowman has written on the impact of the Chancellor's new living wage on employment for CityAM.

There is lots of research into what the minimum wage does to jobs. Of the 103 papers reviewed by economists David Neumark and William Wascher in a 2006 study, most of them showed that raising the minimum wage reduces long-term employment. Of the 33 most methodologically robust studies, 28 (85 per cent) demonstrated this.

The Office for Budget Responsibility estimates that the new living wage will see 60,000 job losses and a £1.5bn cost to the economy overall. This will be among over 25s, who may be their families’ main breadwinners. Until now, the Low Pay Commission has raised the minimum wage very slowly to avoid job losses, and it has often been very restrained in doing so. Those days are now over.

The people who point out that 1997’s minimum wage introduction did not lead to substantial job losses, without considering all the other evidence, are embarrassing themselves. Based on the evidence, there is a consensus: minimum wage hikes cost jobs.

Read the full article here.

Director of The Entrepreneurs Network Philip Salter's comments on the impact of the Budget on entrepreneurs are in the Telegraph.

Philip Salter, director of The Entrepreneurs Network, said: "The Government should leave the decision of what level to set any wage floors in the hands of the experts at the Low Pay Commission, so that business owners aren't forced to sack employees if payroll costs go up too much.

"If the Chancellor wanted to help the low paid, he should have slashed Employers' National Insurance, 70pc of which is paid for by the employees, rather than just increase the Employment Allowance from £2,000 to £3,000 a year."

Read the full article here.

Adam Smith Institute Budget Reaction: Mandatory Living Wage is a disaster

For further comments or to arrange an interview, contact Head of Communications Kate Andrews: kate@adamsmith.org | 07584 778207 Commenting on the Mandatory Living Wage announcement, Deputy Director of the Adam Smith Institute Sam Bowman said:

The new National Living Wage is a disaster that will condemn tens of thousands of people to long-term unemployment. Almost all of the most methodologically-robust academic studies indicate that increases in the minimum wage kill jobs. Low-skilled people, young people and ethnic minorities are the ones who are hit worst.

There is also evidence to suggest that higher minimum wages slow down the creation of new jobs, particularly in sectors that employ large numbers of low-skilled workers. Firms may also respond to this by cutting back on non-monetary worker compensation like break times and sick leave, to offset their increased labour costs.

Britain’s experience with the minimum wage has been benign so far because the Low Pay Commission’s remit has always been to minimise job losses. It has done this admirably, restraining hikes like this. This can no longer be the case.

There is no magic wand we can wave to make workers more productive. Raising the National Insurance threshold for low-income workers would have given them more take-home pay and created jobs. But that would have required spending cuts or tax rises elsewhere, so the Chancellor has taken the politically-easy way out. If the OBR’s estimates are to be believed, today the Chancellor will have put 60,000 people out of work.

Notes to Editors:

For further comments or to arrange an interview, contact Kate Andrews, Head of Communications, at kate@adamsmith.org | 07584 778207.

The Adam Smith Institute is a free market, libertarian think tank based in London. It advocates classically liberal public policies to create a richer, freer world.

Kate Andrews discusses charging for missed GP appointments on Sky News

Head of Communications at the Adam Smith Institute Kate Andrews explained why charging for missed GP appointments could be a positive addition to the NHS on Sky News.

Sam Bowman's comments on Sunday trading hours feature in City AM

Deputy Director Sam Bowman's comments on the Chancellor's plan to extend Sunday trading hours have featured in City AM:

The Adam Smith Institute’s deputy director Sam Bowman welcomed the change: “Brits will be able to shop when they want, where they want. This will only be opposed by nosy moralisers who fret about other people’s consumerism. Some people enjoy shopping – get over it!”

Read the full article here.