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January 27, 2006


Polly Toynbee seems, again, to have skipped a few pages in the economics textbook. On the minimum wage:

Is there a limit to how high it can rise before jobs really are lost? All economists agree there is, but none can say when: just suck it and see. Keep pushing upwards until it begins to do more harm than good. But that level would be quite different in each sector and each region -

So the argument for one national minimum wage is what?

As chair, you are in effect Britain's pay tsar.

Slightly Stalinist isn’t it? One appointed bureaucrat to decide what everyone gets paid?

Under pressure from business, the minimum wage was first set cautiously low at just £3.60 an hour in 1999. The Tories warned that a million jobs would be lost, but nothing of the kind happened. On the contrary, over 2 million jobs have been created since - while 1.3 million workers have benefited from the minimum wage, most of them women. The commission got braver despite ritual CBI protests: the minimum wage has risen well above inflation, up by 40% to £5.05 now. So far, pretty good.

Tsk, tsk. Confusing what has actually happened (the growth in the number of jobs) with what would have happened in the absence of the legislation ( what would jobs growth have been in the absence of a minimum wage?).

Further, the point about the effects of a minimum wage isn’t, contrary to what Polly is saying, one about absolute levels of employment, about the macro effects. It’s about the micro.

Try again Polly.

January 27, 2006 in Economics | Permalink


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She also misses out the rather salient point that, of those two million of those jobs, almost one million have been created by the government...


Posted by: Devil's Kitchen | Jan 27, 2006 12:23:52 PM

Lets put this in context. It was in the Guardian, which has long abjured econmics ( I suppose because it clashes with all sorts of lefty ideas). Bearing this in mind, it was not such a bad article, reasonably informed of conventional economics.
Also, the basic points that we can push the minimum wage higher without causing unemployment, and that a higher minimum wage is desirable are both uncontroversial.
The big danger comes when conditions are no longer conducive to the high minimum wage - can a leftist government spot that and bring the minimum wage down accordingly?
Personally, I've been wondering for some weeks just how high we could push the minimum wage without creating unemployment - who can say that we could not cope with 15 pounds per hour ?
A minimum wage is a dance with the devil, but you won't necessarily lose your soul if you do so dance.
It was not such a bad article, especially considering its lefty provenance.

Posted by: johnny bonk | Jan 28, 2006 2:00:47 AM

Just because its from Polly Tollybottom and published in the "Daily Confiscator" doesn't mean its wrong and bad. That's merely a rule of thumb not a law of nature.

Posted by: johnny bonk | Jan 28, 2006 2:14:58 AM