George Osborne’s Living Wage is likely to see those it is supposed to help lose out, according to a new report from the Institute of Economic Affairs. The IEA finds that modest minimum wage increases may not cause higher unemployment, but large increases will. Who are the losers? The young, unskilled, minorities and those in the regions:
“Minimum wage increases are always potentially a trade-off, between raising pay for those fortunate enough to keep their jobs and hours against the potential reduction in labour demand. Any significant reduction in demand will hit young and unskilled workers, particularly those from minority groups, hardest. It is also likely to have a bigger impact in some parts of the country than others… the ‘bite’ of the National Minimum Wage has been considerably deeper in Northern Ireland and the East Midlands than in London.”
Higher unemployment is a long-term consequence:
“the longer-run impact of the minimum wage might be to generate larger reductions in employment”
And low-paid earners don’t actually benefit as they lose out in other ways:
“firms such as B&Q and Waitrose have been accused of lowering premium pay for weekends and other ‘unsocial hours’, while Caffe Nero staff seem to have lost the perk of free paninis – showing that minimum wage increases are no ‘free lunch’. Those gaining from pay increases therefore lose out in other ways than jobs or hours lost”
The report concludes that someone ultimately has to pay for any sharp minimum wage increase:
“the cost can only be borne by consumers paying more, shareholders getting reduced dividends, or taxpayers paying more”
The Living Wage might make political sense – it leaves Labour with nowhere to go – but the evidence is it hinders those it is supposed to help…
Owen Smith has this morning pledged to raise the minimum wage to £8.25 in a pitch aimed at wooing Corbynistas. Just one problem. George Osborne’s Living Wage means it is set to increase to £9 for workers aged 25 and older by 2020. On top of this, Trading Economics have created a model forecasting minimum wage increases to approximately £9 per hour for all workers by 2020 anyway. So Smith’s offer is effectively a 75p cut. Slow clap.
Meanwhile Oily has been up in Liverpool, drawing very modest crowds in comparison to Jezza. Interesting that Merseyside MPs Luciana Berger, Louise Ellman, Frank Field, Conor McGinn, Alison McGovern and Angela Eagle were nowhere to be seen. Have they given up already?
“Keep the living wage alive,” argues one of many articles published by the Fabian Society calling for a mandatory Living Wage.
It’s a bit of a theme: “a voluntary expansion of living wage employers” is not enough, they say.
“Time to make living wage a requirement,” insists another piece:
“We need politicians to make the living wage a requirement on public and private employers, not an optional extra. Leaving it up to voluntary schemes will never end the scandal of poverty pay. Government action is urgently needed, and the public support it. What are we waiting for?”
Well, the Fabians’ new Events and Office Assistant, based in London, will be waiting for some time before they are paid the London Living Wage. The advertised salary of £16,653 a year is well below the £18,080 the Living Wage Foundation say workers in the capital need. Seems they had a point when they said “Leaving it up to voluntary schemes will never end the scandal of poverty pay”…
The Fabians aren’t the only ones failing to practise what they preach. The Church of England says that “as well as encouraging other employers to pay the Living Wage, it is important for the Church to lead by example,” warning “it is morally unacceptable” for bosses to exploit low-paid staff.
This divine intervention clearly did not reach the Bishop of St Albans, who is offering a meagre £14,328 per year to be his parliamentary researcher, based in the House of Lords. What is it with these lefties and not putting their money where their mouth is…