Top Wonks Slam Osborne’s Minimum Wage Rise

Osborne ruining Ed’s big day by calling for a rise in the minimum wage is politically cunning, though it remains a fundamentally unsound economic idea. Here is a round up of how some of the more sensible think tanks responded to the idea of an increase to £7-an-hour:

Adam Smith Institute – “A minimum wage increase will hurt the poor, particularly young people and vulnerable groups like migrant workers. Most of the empirical economic evidence has found that increases in the minimum wage cause increases in unemployment. Even if the immediate impact is not large, this increase will lead to a long-run decline in job creation and standards for Britain’s poorest workers. It will hurt the very people it is supposed to help.”

Institute of Economic Affairs“This move would not only jeopardise the jobs of some of the most vulnerable workers in the country, it will make it even harder for the young and out of work to get a foot on the employment ladder. If an employer cannot afford to hire someone because the minimum wage is too high, then someone who otherwise could have found work remains unemployed. The minimum wage is a blunt instrument. Increasing it will damage both business growth and society’s most vulnerable.”

Centre for Policy Studies – “Those who suffer most from a rise are the unskilled and young, who have low productivity and get priced out of the market – denying them the chance to accumulate “on the job” human capital. Higher minimum wages make it less profitable for firms to take on untested employees. This may be one reason why youth unemployment and unpaid internships became more common, even in a healthy pre-crisis jobs market.”

Still, you’d need a heart of stone not to enjoy Labour’s squirming this morning…



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