'Is it too much of a stretch to recognise that poverty is the CAUSE of poor growth.'
The minimum wage should be frozen and then cut in order to increase competitiveness within the labour market, according to a group of economists backed by Liz Truss.
As it set out plans to boost growth ahead of next week’s Autumn Statement, the Growth Commission, an independent group of international economists, argue that an increase to the minimum wage would be a “significant drag on the economy.”
At an event in Westminster this week, the group announced details of its 101-page report entitled: The Growth Budget 2023. At the presentation, Douglas McWilliams, who co-chairs the organisation, said the current level of the minimum wage was “destroying jobs.”
“The minimum wage at its current level is actually destroying jobs because employers can’t afford to take people on,” he said.
The Growth Commission was formed by Liz Truss, following her resignation as prime minister after her chaotic 49 days in government. Truss was in the audience at the Commission’s event, alongside Jacob Rees-Mogg and former Brexit negotiator, Lord David Frost.
Minimum wage rates increased in April. The level is currently set at £10.42 an hour for those aged 23 and over. 21-22-year-olds must be paid a minimum of £10.18 an hour, 18 to 20-year-olds receive £7.49 and under 18s and apprentices have to be paid no lower than an hourly rate of £5.28.
Growth Commission co-chairman, Shanker Singham, said the group was “concerned about how high” Britain’s minimum wage is compared with other countries in the Organisation for Economic Co-operation and Development (OECD).
“There is nothing wrong with the minimum wage. What matters in terms of competition is where it is set,” said Singham.
“What we are intending to do in the UK is move it to 66 percent of median wage, which is far higher than any other OECD country by next year and will be a significant drag on the economy.
“So we are suggesting freezing it and targeting it down to 61 percent.
“Even that small reduction or that small change in minimum wage has a very big impact on GDP per capita, according to our calculations,” he added.
The call for the minimum wage to be cut attracted criticism. Some shared their disproval online.
“This is a demonstration of an inability to address the facts on the ground. The country has the lowest growth and the highest poverty in living memory. Is it too much of a stretch to recognise that poverty is the CAUSE of poor growth,” someone posted on X.
The Growth Commission’s calls to reduce the minimum wage come as the rising cost of living continues to drive more and more people in Britain into poverty. New research from the Joseph Rowntree Foundation shows 3.8 million people experienced the most extreme form of poverty – destitution – in 2022. That marked a 61 percent increase since 2019. More than 1 million of those affected were children.
As more and more households are struggling to afford the basics to live, there is an increasing reliance on food banks to survive, which are reportedly at ‘breaking point.’
Gabrielle Pickard-Whitehead is a contributing editor to Left Foot Forward