Making work pay…by freezing the minimum wage

The chancellor George Osborne will make a speech today in which he will say the government is “making work pay” through tax and benefit changes. Making work pay is an admirable goal and something that everyone on the left supports. The problem, however, is that the government’s idea of making work pay is radically different to that of most progressives, as a quick glance at today’s Daily Telegraph makes clear.

The chancellor George Osborne will make a speech today in which he will say the government is “making work pay” through tax and benefit changes.

By giving examples of how the government is supporting those who “get up in the morning and work hard”, Osborne will aim to put substance on government claims to be supporting “strivers” and encouraging aspiration.

Making work pay is an admirable goal and something that everyone on the left supports. The problem, however, is that the government’s idea of making work pay is radically different to that of most progressives, as a quick glance at today’s Daily Telegraph makes clear.

On page four the Telegraph reports that the minimum wage could be frozen “if the economic downturn continues”.

“The low pay commission, which sets the wage level, has been told that it must consider the impact on employment and the economy before agreeing future increases,” the paper says.

Like so much of what the government is now doing this stands counter to what the Conservative Party said when it was opposition. “Modern Conservatives acknowledge the fairness of a minimum wage,” said George Osborne in 2008.

Also, not only is there very little evidence to suggest that reducing or getting rid of the minimum wage would create jobs (a 1994 study found the opposite; and the introduction of the minimum wage in the UK was not accompanied by rising unemployment) the underlying problem of a flat lining economy will not be resolved by taking money out of the pockets of those most likely to spend it – teenagers and young people.

As Tim Harford has put it in the FT (£), “if a young adult cannot produce enough of value to justify being paid a living wage, nothing we do to the minimum wage will help. He, the institutions which trained him and the society in which he lives, have far bigger problems”.

So much for “making work pay”.

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