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article imageOp-Ed: Who does the minimum wage help and hurt?

By Alexander Baron     Jan 16, 2014 in Politics
London - Chancellor George Osborne has announced an increase in the minimum wage? Clearly he doesn't know anything about economics, or maybe he does?
This move was announced today when the Chancellor explained himself to the BBC. If you don't understand why an increase in the UK minimum wage or any minimum wage is bad for workers, here is an article from last year written from an American perspective. Note one of the points made therein: "the government and indeed local government can create any number of these and pay said workers generously, but where does the money to do so come from, and what effect does this sort of thing have on taxes and rates?"
The following month it was reported here that the State of New York would be subsidising the minimum wage.
Increasing the minimum wage may help some low paid workers, but it does a lot more harm than good. Although George Osborne studied modern history rather than economics at Oxford, there are plenty of people in the Conservative Party who did study economics, Matthew Hancock MP, for example, who has worked at the Bank of England.
If those working in the public sector will benefit from an increase in the minimum wage then those working in the private sector will be hit, and small businesses will suffer the most. Indeed, big business will probably not suffer at all. There is a reason for this.
In the US, the multinational Walmart corporation has been subjected to what might be construed as a hate campaign due to its low pay including for part-time workers. It is very easy to portray big companies as evil corporations exploiting the oppressed, but big companies tend to employ more workers than they need, so if Walmart decides it no longer makes sense to employ X staff at Y wage, then it will be able to let some of them go. What though of a small business, a burger bar perhaps, like the one below?
Small businesses like this one will be hurt most of all by a hike in the minimum wage.
Small businesses like this one will be hurt most of all by a hike in the minimum wage.
Creative Commons
A small company that cannot employ sufficient staff may well go under. Although red tape and regulation are detrimental to all private sector firms, small companies are always hit worse than big ones, so paradoxically they benefit due to the reduction of competition, while the people who suffer the most are those who lose their jobs, including jobs that are no longer created.
It may be that George Osborne doesn't realise this, but judging by the company he keeps, he probably does!
If he wants genuinely to help those at the bottom of the food chain, there are plenty of things he could do. First and foremost he and the British Government could tell the banksters what to do with their national debt, or a large tranche of it. As the Duke of Bedford pointed out back in the 1940s, this is both absurd and unnecessary.
If that measure is not feasible politically, then he could institute a Basic Income, which would likewise require financial reform, but could be done within the current legislative framework. This would lead too to the near abolition of social security with its cumbersome means tests and everything that goes with it.
Finally — at least as far as this short dissertation is concerned — he could reduce the cost of travel. The price of an off-peak travel card in London is rising this month from the scandalous £8.00 to the surreal £8.90. The rail network — ostensibly private companies — is being subsidised by both the taxpayer and the passenger. The price of motoring is equally outrageous, and that means the cost of transporting everything, because apart from the cabbages and carrots your granddad grows on his allotment, everything you consume comes from somewhere else.
A reduction in the price of transport and of transporting goods would reduce the cost of living massively, especially for those on both low pay and no-pay. There are painless ways to bring this about, but they require both a concerted effort and a certain amount of thinking outside the box. Either that, or a change of government.
This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of DigitalJournal.com
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