A leading think tank has warned that Labour leader Ed Miliband’s plan to link the minimum wage to average earnings will make it harder for the unemployed to enter work. The Institute for Economic Affairs (IEA), claims that a higher minimum wage would jeopardise low paid jobs and make it harder for young people to get employment.
Over the weekend Ed Miliband announced that he would create a statutory link between average income and the minimum wage, although he declined to confirm what it would be. The plan has led to fears that the cost of employment will be pushed up, pricing many out of the jobs market altogether.
In a statement today the IEA pointed out that the principal cause of poverty in Britain was unemployment, and anything that made getting a job harder would make this worse.
Since 2010 both the Conservatives and the Liberal Democrats have been pursuing a policy of tax cuts for the poorest. They have taken 2.7 million people out of income tax altogether by raising the threshold to £10,000. Now some Conservative MPs are even talking about renaming National Insurance to Employment Tax so that people will understand the need to cut that too.
Labour on the other hand is not offering an overall reduction in tax, but instead pushing up salaries through the minimum wage. But in many low paid sectors margins are so tight that any increase in the minimum wage will make it harder to hire people. This in turn cuts tax revenue, damages the economy and condemns the poorest in society to the dole queue.
Mark Littlewood, Director General of the IEA, told Breitbart London: “A higher minimum wage would not only jeopardise the jobs of some of the most vulnerable workers in the country, it will make it even harder for the young and out of work to get a foot on the employment ladder.
“Politicians should be focusing on tackling rising living costs to benefit everyone, rather than creating an even higher barrier in the labour market. The minimum wage is a blunt instrument. Increasing it will damage both business growth and society’s most vulnerable.”
Labour’s plans are likely to add to growing concerns that the party has failed to learn the lessons from their 13 years in office. During that time they virtually bankrupted the UK, sold off half the gold reserve at around a quarter of its value, and created a huge long term benefits culture that increased inequality.