The real impact falls on those seeking jobs. Rather than sacking existing workers (which can be costly and distressing), employers prefer to reduce new hiring and ask for more experience and qualifications. As a result, young people find it harder to get a toehold in the labour market. Among them, ethnic minorities typically get the toughest deal. Thomas Sowell, the prominent African-American economist, has argued against minimum wages in the US because any negative employment effects fall disproportionately on young black workers; the same is almost certainly true here.
Bear in mind, too, that the minimum wage is national, which means it has very different effects across the UK. In London, the NMW is only around 35 per cent of the median hourly wage; in regions like Wales, Northern Ireland, the North East and the North West, it is over 50 per cent. So following a significant increase in the minimum wage, you would not want to be a young job-seeker with few qualifications in Newcastle or Swansea.
The poorest-paid are also not necessarily in poverty. Well over half of minimum wage workers are part-time. Many are students, others are secondary earners in otherwise reasonably well-off households. So as an anti-poverty policy, it is poorly directed. Nor is it likely that the government will save much on in-work benefits like tax credits. Most of those on minimum wages do not access them. Those on housing benefit are likely to stay on it. And if job-seekers spend longer finding work as a consequence, other benefit spending is likely to increase.
quarta-feira, janeiro 15, 2014
raising the minimum wage hurts the poor
Via O Insurgente, Why raising the minimum wage is not the best way to help Britain's poorest: