Thursday, 29 October 2009

The minimum wage should not rise

The TUC is calling for the minimum wage to rise by 20p, to £6. Quite clearly they don't realise that we are in recession (or are ignorant).

Wage rigidity is a major cause of unemployment and indeed depressions - they hold back job creation and therefore the utility of unused capacity to increase growth.

But that isn't the point - why is government intervening in the labour market? All the minimum wage does is stops people willingly working for lower than the minimum wage getting jobs. Does anyone fill up your car with petrol now? No. In fact, despite what they say about it "not causing any unemployment in the previous 12 years", it actually priced a certain band of people out of the labour market altogether and pushed them on to state benefits - those who can only work for lower wages. They need the experience of a lower paid job first perhaps, then can move upwards and into higher paid work. (Obviously Labour just wants to throw them all straight towards university to read Media Studies).

It's one thing having a minimum wage in the good years, but in a recession it's economic suicide. It shouldn't be increased, it should be scrapped, or at least suspended until employment levels have recovered. Wage fluidity is a must in hard times - distorting markets makes them reallocate resources a lot less quickly.

I also can't understand why David Cameron calls it a "good thing" (why do no MPs stand up against it?) - I think it's a good thing having a job and a bad thing being on benefits because you're priced out of the labour market!

Once again trade unions push for economic suicide - and clearly don't recognise that better living conditions is long run - you may start on a lower wage, but you'll get to a higher wage and better living standards in a matter of years. It's better than not having a job and relying on the state.

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