The iniquity of the minimum wage

Keith Hudson

I see in today’s paper that the private door-to-door mail delivery service, Whistl, has had to suspend operations in Manchester, Liverpool and parts of London because they are no longer profitable.  This will put 2,000 jobs ar risk . . . and Whistl’s operations will now have to be taken back by Royal Mail which is already experiencing a dramatic slump in profits and will have to be subsidised even more than previously.

If, however, Whistl had been allowed to pay a sensible wage — that is, below that of the legal minimum — then it would undoubtedly have been profitable.  And so would the Royal Mail incidentally — taxpayers’ money would have been saved.  Superficially, the legal minimum wage sounds socially attractive.  By all means the government has a general duty of care in ensuring that young job seekers are not exploited.

However, although economists have shown time and again in so many case studies in so many countries that the legal minimum wage deprives young people, particularly school-leavers, of many jobs that they otherwise could have had — and so gaining some experience on the job ladder — this unfortunate legislation has been enacted.

Small  business employers have also complained that they could be offering more jobs than they can presently afford if they were allowed to pay less.  Many small businesses have had to shut up shop since the passing of the Minimum Wage Act by the last Labour government (and the Democratic Party in the US) under immense pressure from the trade unions which ‘innocently’ claim that all they are seeking to do is to protect the earnings of their members against employers who would otherwise be greedy.

This doesn’t protect employment for their members over the longer term.  The impositition of the minimum wage merely postpones the development of efficiency in firms which are so badly managed that they can only just survive by paying low wages.  Workers in the jobs market as a whole would benefit if these firms promptly went out of business and more efficient firms took their place.

If the minimum wage legislation were repealed then many hundreds of thousands of jobs for young people could be created all over the country.  An interesting contrast to the Whistl situation was recently exemplified on a BBC documentary about Harley Street, London, where very high-priced private doctors tend to take prestige leases for their practices.  These doctors are not quacks and are often surgeons and other consultants at the top of their professions who’ve worked in the National Health Service for many years beforehand.

When deciding to work in Harley Street, they’ve naturally wanted to use all the ancillary services — blood analyses, DNA sequencing, tissue samples, reports of other specialists, etc — that they need.  And, unlike the more leisurely pace of the NHS, Harley Street doctors charging high fees per hour need these at rapidly as possible — same day service if possibe and often sometimes within the hour while their patients are still with them in their surgeries.

Accordingly they use messengers.  These are young men (usually) on bicycles who pedal their way at great speed along nearby steets in and out of heavy traffic between all the laboratories and specialist clinics that have set themselves up within a mile or two radius of Harley Street.  The messengers are intelligent, reliable young men who are paid considerably more than the minimum wage because it is a dangerous job.  Most of them can expect an accident sooner or later.  Even in this high-risk job  there’s no shortage of young men wanting to fill any vacancy that comes along.

How much more would this apply to hundreds of thousands of other jobs of much lower risk around the country that might have been a available if the wages were allowed to be make them feasibe from both the employer’s and the young employee’s point of view?  Unfortuantely these jobs are now non-existent because of minimum wage legislation.  It is iniquitous legislation, no less.

2 thoughts on “The iniquity of the minimum wage

  1. Producers of goods and services are forever looking for ways to cut their costs, and in this day and age there are many ways in which costs can be cut. I remember a time just a few years ago had an attendant who took your money, gave you a ticket and let you in and out. Now there are very few parking attendants; it’s mostly all done by machines. And in manufacturing, even relatively low labour costs can be reduced further by having things made by cheaper labour abroad. So where does this put the minimum wage? Nowhere really. What it is intended to do is always vulnerable to technological or globalizational displacement. What seems to be needed is a minimum wage – a Robin Hood measure that takes from the rich and gives to the poor. Of course, a lot of thought would have to be given to how such a measure would be applied.

  2. I should have checked more carefully! What I intended to say was needed was guaranteed annual income, not a minimum wage – an income that would not discourage people from working but would provide as necessary if there were no jobs.

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