While the UK government today announced an increase of 3 percent in the minimum wage, economics experts have claimed the move could indeed hamper job creation and impede UK growth prospects.
Speaking earlier today, Britain’s Business Secretary Vince Cable said that the government approved a rise in the National Minimum Wage to £6.50 per hour, with more than 1 million people set to see their pay rise by as much as £355 a year.
But think-tank experts beg to differ.
Ryan Bourne, of the Institute of Economic Affairs told Breitbart London: “The government cannot just decree what the wage of many low skilled workers should be without consequences for either employment, working hours, non-pay benefits or prices in those industries.
“Its own estimates of the effect of increasing the minimum wage is for a small negative effect on employment. This 3 per cent increase in the minimum wage will especially harm those unskilled workers looking to get a first employment opportunity, which allows them on-the-job learning and experience.
“The one saving grace is that the government ignored those calling for much higher, more damaging increases, which could have proved disastrous at a time of high long-term and youth unemployment”.
Sam Bowman of the Adam Smith Institute wrote in January, “One way to actually help low-income workers would be to raise the income tax and National Insurance threshold to the current minimum wage level, which would give these workers a take-home pay equivalent to a minimum wage. That would require spending cuts or tax rises elsewhere, but it would be a responsible and effective way to improve the lot of the working poor that would carry none of the unemployment risks that this minimum wage increase does – in fact, it would create jobs.”
A paper published in January by the Bow Group, Britain’s oldest Conservative think-tank, warned against a rise in the minimum wage, claiming that “George Osborne and the government are artificially manipulating the economy for political gains in the run up to 2015, to the detriment of its medium to long-term development”.
Bow Group Chairman Ben Harris Quinney told Breitbart London: “It is an inescapable economic reality that Imposing and increasing a national minimum wage restricts small business growth and increases unemployment.
“The government should be looking to Germany and Austria, where the absence of a minimum wage has contributed to the Eurozone’s lowest rates of youth unemployment at 7.9 percent and 8.7 percent respectively.
“We should not be further hamstringing the prospects of our youth or small businesses, but should instead focus on improving the provision of vocational education in the UK and improving the UK’s competitiveness internationally. This is the only way to secure a long term recovery and rebalance the economy, and this goal should be above short-term populism and political manipulation”.