Why cutting or scrapping the minimum wage is economic lunacy


by Jon Stone    
4:15 pm - August 17th 2011

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Dr Eamonn Butler, Director of the right-wing think tank The Adam Smith Institute, says we should scrap the minimum wage in order to reduce unemployment. Similar calls have come from right-wing Tory MPs.

The IEA also unsurprisingly chimes in. With unemployment up again today, it’s likely we’ll hear more of the same from the usual suspects.

The argument behind this is simple enough. The rationale isn’t however.

Assuming firms have a fixed amount of money to spend on wages, and they could pay some of their workers a lower equilibrium wage (because the current one is held artificially high by the minimum wage floor) they could then hire more workers – thus reducing unemployment.

But Iain Duncan Smith, the Secretary of State for Work and Pensions helpfully points out that the current benefit system leaves you better off out of work that in work. Presumably if people were able to work for below the minimum wage this would be even more true.

So what would the result of scrapping the minimum wage be?

Firstly, if Butler is right, those who were currently working at the minimum wage would have lower wages. Secondly, if Duncan-Smith is also right, those who were previously unemployed and were now in work would have less money to spend than they did when they were unemployed – maybe even more-so than if they got a job today, because the minimum wage would have been scrapped.

What is a fall in wages and disposable incomes going to do? Almost certainly cause a fall in effective demand. Which as Duncan Weldon points out, is exactly the problem with the economy at the moment. And of course, unless demand were to pick up, firms are unlikely to start investing that cash they’re sitting on either.

Let’s hope that Butler and Duncan-Smith aren’t both right! As it happens I think Dr Eamonn Butler is probably the most wrong here. Firms aren’t likely to hire more people simply because labour costs have reduced.

Firms are already in surplus and are net savers at the moment – they could hire more people if they wanted to. The reason they’re not doing it is because there is no effective demand for their services.

And one of the reasons why there is no demand is because real wages are falling

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Jon is an occasional contributor to Liberal Conspiracy. He blogs at The Red Rock
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Reader comments


The so-called Taxpayers’ Alliance have also come out in favour of scrapping the minimum wage, back in April:

http://zelo-street.blogspot.com/2011/04/picking-on-poorest-7.html

Their argument is that it’s all about “fairness”. Get that spin cycle charged up!

“But Iain Duncan Smith, the Secretary of State for Work and Pensions helpfully points out that the current benefit system leaves you better off out of work that in work.”

Although it doesn’t really, does it? Otherwise IDS himself would be worse off than unemployed ex-miners from Featherstone or Abertillery.

Talk about a straw man rebuttal..

And what about the boost in demand that will come from all the graduates who will be able to finally gain the necessary skills & experience to climb the ladder of the profession they are qualified for? And all the unemployed people who aren’t leaches like you seem to think they are, and who will forego their benefits for a chance to get their foot on the employment ladder?

Surely the solution, therefore, is to reform the benefits system…?

And as above comment states, If some do find it more profitable to sign on then the benefit system must be reformed to make sure it’s never a long-term option.

7. Name Required

Very true, but right-wingers never let reality get in the way of their ideology. The greed, sadism, cruelty and selfishness of right-wingers is infinite, so they will carry on screaming for the abolition of the minimum wage because they revel in the misery of the poor, they love it, because it makes them feel like superior beings.

The effective demand point is well made. There are other equally important
arguments for keeping the minimum wage. Allowing firms to remain competitive by reducing labour costs is extremely short sighted. Putting a floor under wages means that if they are going to have to maintain competitiveness then they are going to have to do it through genuine improvements in technical efficiency, investment in more sophisticated technology. The UK shouldn’t be trying to compete using this mechanism. Also, the research evidence that a minimum wage generates unemployment is contestable and is subject to publication bias.

The minimum wage is already so low most can’t live on it without handouts from the state. Why should my taxes be used to subsidise greedy employers?

But why should companies pay anything for staff when the state will provide workfare slaves at no cost (except to the taxpayer) http://www.corporatewatch.org/?lid=4029

I personally favour sticking with the minimum wage but your defence of it here makes little sense at all.

You have two arguments against scrapping the minimum wage:

1) That people will be better off on benefits. Well, that would depend on each individuals circumstances and makes no allowance for fact someone might want to work rather than not work.

2) That it would reduce overall demand in the economy. Well at a macro-level possibly but does any employer think about that when they are considering hiring extra staff for £5 an hour rather than nearer £6 ?

This is a very poor article because it doesn’t address the main argument against the minimum wage; that people who are not worth employing at that amount are unable to gain any decent experience. This is a problem, it does need addressing and it’s the long term unemployed who are most damaged by it.

The main point is that scrapping the minimum wage is likely to reduce aggregate demand and thus have a negative impact on the UK’s short term economic prospects.

As some commenters have recognised, there are many other points for and against the minimum wage – but this is the criticism that I’m making in the article because it is one that is immediately relevant to the situation we’re in: one of economic stagnation and low demand.

Full time minimum wage work at the moment will get you 12k a year. A strong proportion of the labour force works part time at the minimum wage, because those are the shifts offered or because they have to fit work around childcare. So hypothetically say you’re on 25 hours per week, you’re roughly paid £600 per month, or £7500ish per year.

If you think the minimum wage should be reduced so that families will have less than this sum to live on per year, and that benefits should concurrently be reduced so that less than £7500 per year is an attractive prospect, you frankly have an insane idea of how much money a person needs to live on. Clue: it’s more than that.

Firstly, if Butler is right, those who were currently working at the minimum wage would have lower wages.

I’m not sure this is right. If Butler is right that the existence of a minimum wage prices out the lowest value workers, thereby increasing unemployment, then its removal would simply mean that these currently unemployed low-value workers would get employed at lower wages.

Those already employed are so employed because their value as a worker is equal to or higher than the current minimum wage. That wouldn’t change if the NMW was abolished.

Pay people a living wage. Those people will suddenly have disposable income to spend on consumer goods or whatever. They’ll also be happier with their jobs which increases productivity. Increased sales of good/productivity = more jobs, more profit, more tax revenue for the government (and the possibility of being able to lower taxes), lower deficit (or no deficit at all), improved economic performance and confidence. Everyone wins.

It doesn’t take a genius to work out that if you strip a person of the ability to pay for anything other than the most essential goods and services (and probably make them choose one over another) then you’re going to damage the economy and increase the cost to the government in welfare payments. Making people work for slave wages only profits the slave owners and even then it’s a temporary at best false economy.

16. DisgustedOfTunbridgeWells

This is a very poor article because it doesn’t address the main argument against the minimum wage; that people who are not worth employing at that amount are unable to gain any decent experience. This is a problem, it does need addressing and it’s the long term unemployed who are most damaged by it.

To which the argument is that once the economy approaches the natural rate of employment, it creates incentives for both labour and capital to be effective/efficient at that minimum level.

Tim J

I think you’re mistakenly implying a fixed value of a person’s labour there – I suspect that in reality you’d find that the job of an office cleaner working minimum wage whose labour was ‘valued’ (or rather priced) at minimum wage now would very quickly find their labour priced at less if the minimum wage were removed.

And yet the demand for cleaners would be unlikely to change because as with most minimum wage jobs their demand is fairly inelastic – offices need to be cleaned and are currently being cleaned.

Since we know that firms on aggregate are sitting on a surplus, (see links in article of sectoral savings rates) the problem clearly isn’t high labour costs but a lack of demand. All reducing labour costs would do is increase the inactive corporate sector surplus.

Tim J @ 14

Did we have full employment before the minimum wage? Did we even have anything like full employment before the minimum wage? Do similar countries with lower minimum wage than us have full employment? Does Spain have full employment.

So Tim, what jobs are not being done in this Country had the minimum wage never existed?

And people wonder why I despise the Tories? People wonder why I call them vermin? Who goes after the weakest members of society like that?

I’m far more impressed with those naive enough to believe employers actually value the labour done by minimum wage workers. If they really valued their employee’s efforts, and didn’t regard them as disposable with plenty of faceless masses ready to replace them at a moments notice, they wouldn’t be paying them the bear minimum they can legally get away with.

Bare minimum, even :/

‘And people wonder why I despise the Tories? People wonder why I call them vermin? Who goes after the weakest members of society like that?’

Yep. And then they complain when people call them out for being revolting subhuman mentally ill sociopaths.

which rock do vile individuals like holmes come out from under? I guess if you have no morals or empathy due to some sort of innate problem then a well-paid ‘career’ churning out apologia for the plutocratic gangsters and barbarians who have taken over most of the civilised world in some sort of right wing thinktank hell is an easy win.

Also, if the Minimum wage was scrapped, wouldnt workers be entitled to more tax credits? So the cost to the state would actually INCREASE?

24. Charlieman

@19. Cylux: “If they really valued their employee’s efforts, and didn’t regard them as disposable with plenty of faceless masses ready to replace them at a moments notice, they wouldn’t be paying them the bare minimum they can legally get away with.”

Thanks to UK employment law and the efforts of trade unions, there are relatively few examples where a low paid job is massively profitable to the employer. Most low paid jobs generate a small return on the cost of labour. Most publicans pay something around the minimum wage to bar staff, and lots of pubs are barely profitable. Across the world in China, electronics manufacturers are talking about increased robotic production and shifting employees to more productive roles (eg quality control).

And the China example suggests why it is not in the interest of employers to rely on low paid labour. If company X is making stuff, eventually company Y will come up with a production method that uses less UK labour or will shift production to a lower wage economy. Either of those will be enough to put company X out of business.

Hair dressers, delivery drivers and vegetable packers need to be in the UK, and there will always be labour cost pressure on employers. But they may be short sighted if they disregard staff training, motivation and pay.

If all we were worried about was demand, the government handing out tenners on street corners would have the same effect.

I don’t think the OP argument about demand works if employers responded by employing more workers.

The NMW generates tremendous heat from both sides for something that for the vast majority of the labour market was trivially unimportant. The introduction of the NMW only affected 8.5% of female workers and 3.2% of males. When it was uprated in 2003 only 1.5% of the male labour force was affected. The NMW is just not that important when one aggregates the UK labour market. However, it is important not to think about the labour market as a lump of labour. Some groups may be suffering amplified effects. For example, what is the youth unemployment rate for those aged 18-24 compared to those aged 50-56? Of course, correlation is not causation. More female workers were affected by the NMW than male workers. Over the last few years we appear to have faster growing female unemployment than male unemployment. Of course, correlation is not causation.

A firm with inelastic demand for MW labour would be unlikely to respond with employing less labour. What they would do initially is to cut hours and that is how employers responded to the NMW.

The reports of employers cutting hours for some workers and the increase in part-time work could be another of those correlation does not imply causation things.

Abolishing the NMW probably would not have as dramatic effect on unemployment as some on the right believe. However, it probably would lead to an increase in available hours for those in work. We should recognise that we may be making it more difficult for some youths in particular to gain entry to the workforce. Although low wages are not the route to prosperity. The effective MW for someone who can’t get a job is always zero no matter what the government says the MW should be.

So Tim, what jobs are not being done in this Country had the minimum wage never existed?

If you’re asking what jobs aren’t being done that would be if there was no minimum wage, then I’d look at one area in particular – the replacement of low-skill labour with technology. So, self-service check-outs would be one.

Who goes after the weakest members of society like that?

You’re getting confused between moral posturing and policy thought again.

Is it better for people to be unemployed or in work? Since low salaries are (or can be) topped up with tax credits would it be better for a minimum wage to be replaced by a minimum compensation made up of a combination of wages and tax credits? You can argue that it’s better for low skilled people to be out of work and on benefits, but I don’t see that your position is morally unassailable.

But I wasn’t, incidentally, making that argument myself – just saying what I saw Butler’s argument to be. If a minimum wage stops firms hiring workers who are less productive than the cost of employing them at the minimum wage, then the logic of that argument is that people who are employed at the minimum wage are sufficiently productive to merit employment at that rate. And if they are sufficiently productive, then there’s no logical reason why a reduction in the minimum wage should see their wages fall.

That might be simplistic, but the argument that the wages of everyone currently on the minimum wage would fall if the minimum wage were to be cut/scrapped seems equally simplistic.

I have no objection to the NMW. I think it provides a useful basic benchmark for employees and employers, and I think Labour set it at the right level. However, if we want to deal with the long-term and often unskilled unemployed who need experience of work, I see no reason why employers should not be able to pay them less than NMW for a strictly limited period.

28. Name Required

22. Joe

“which rock do vile individuals like holmes come out from under? I guess if you have no morals or empathy due to some sort of innate problem then a well-paid ‘career’ churning out apologia for the plutocratic gangsters and barbarians who have taken over most of the civilised world in some sort of right wing thinktank hell is an easy win.”

But it’s not really a problem for them though, their lack of empathy and compassion towards the poor and vulnerable only hurts their victims, for them it’s an asset. It means they can get the best of everything at other people’s expense and there is no price to pay – no feelings of guilt or shame. Conservative ideology provides many justifications for blaming the victims of their policies and therefore allows them to circumvent whatever conscience they may have.

29. Name Required

23. John Ruddy

“Also, if the Minimum wage was scrapped, wouldnt workers be entitled to more tax credits? So the cost to the state would actually INCREASE?”

In that case it’s not hard to figure out what the right-wing will start calling for next – the abolition of tax credits. Not sure what sophistry they will use to justify it but I’m sure they will come up with something, they always do.

30. Name Required

27. paul ilc

“I have no objection to the NMW. I think it provides a useful basic benchmark for employees and employers, and I think Labour set it at the right level. However, if we want to deal with the long-term and often unskilled unemployed who need experience of work, I see no reason why employers should not be able to pay them less than NMW for a strictly limited period.”

Yeah and then when the limited period is over the employer just gets a new long term unemployed person to take over where the last one left off to give them “experience” (dirt cheap labour), which the employer continues to do indefinitely, just like the right-wing workfare scam.

Tim J @ 26

If you’re asking what jobs aren’t being done that would be if there was no minimum wage, then I’d look at one area in particular – the replacement of low-skill labour with technology. So, self-service check-outs would be one.

Hmm, not too sure about that, though Tim. Self service checkouts are not actually killing jobs are they? I mean they are being introduced, but they are not replacing workers they are in addittion to the workforce. But even if they were killing the jobs off, I wonder how much you would need to undercut the machines? Given that you are paying till staff six quid an hour (slightly above the minimum wage) that doesn’t leave much room to undercut a machine, does it. That machine still needs bought and serviced.

Since low salaries are (or can be) topped up with tax credits would it be better for a minimum wage to be replaced by a minimum compensation made up of a combination of wages and tax credits?

Why should we subsidise some of the most profitable companies on the planet? Surely you of all people want to promote self reliance and a move away from the State dependency?

If a minimum wage stops firms hiring workers who are less productive than the cost of employing them at the minimum wage, then the logic of that argument is that people who are employed at the minimum wage are sufficiently productive to merit employment at that rate.

But what are these jobs currently missing from the economy? What are these low productivity jobs that are currently undone that would be done if you hammered the poorest workers in society? Give me an example of the type of jobs that our economy is missing that people in lower wage economies are doing?

32. Charles Wheeler

The Tories, Blairites and Orange Bookists are neoliberals. A minimum wage has no place in a neoliberal playbook. Why is this a surprise?

The poor must be starved into employment. This is a consistent theme in right-wing economics. The fact that it doesn’t work – as Keynes explained – is immaterial.

The only surprise is how few bloggers seem to understand the basics of the ideology driving public policy.

Self service checkouts are not actually killing jobs are they? I mean they are being introduced, but they are not replacing workers they are in addittion to the workforce

Doubt it. Stores where there are self-service check-outs have fewer staff on check outs.

Why should we subsidise some of the most profitable companies on the planet?

We wouldn’t be. The company would be paying its staff (on this theory) the value they receive from them. If they had to pay more, they wouldn’t employ them at all.

Give me an example of the type of jobs that our economy is missing that people in lower wage economies are doing?

Virtually all low/unskilled work?

Again, do please note that I’m not actually advocating cutting or scrapping the NMW. I’m just explaining the theory behind why such a move might be effective. (he says, in the vain hope that we can get away from the tiresome moral posturing). The point made above by Richard W is actually most relevant to this – NMW actually affects only a tiny minority of the workforce.

test

NR @ 30

“Yeah and then when the limited period is over the employer just gets a new long term unemployed person to take over where the last one left off to give them “experience” (dirt cheap labour), which the employer continues to do indefinitely…”

Perhaps, but remember that the employer will have all the hassle and cost of recruiting another such worker. If the employee has proved his/her worth, they might well be kept on. And in any event the employee will have got some useful work experience, which is more than they had before…

Tim @ 33

Doubt it. Stores where there are self-service check-outs have fewer staff on check outs.

Do they? Is that true? I think you will find that in every supermarket you have ever been to not all the tills are working all the time. Some are on at peak time with a select few on ‘all day’. What has happened is that staff, mostly part time have been moved to peak times. Seriously, the next time you are in a supermarket watch the queues between the manned and unmanned checkouts, the maned checkouts go faster.

If they had to pay more, they wouldn’t employ them at all.

I am not sure that holds water, though Tim. Given that the minimum wage is in force at the moment, we are already paying people more than companies would be willing to pay and no one seems too worried.

Virtually all low/unskilled work?

Again, Tim, low skilled work is still being done here, and will still be done in the near future too, but for the life of me I cannot see what low skill jobs we are missing that lower wage countries lie Spain are doing.

Actually US supermarkets are realising that self-service checkouts tend to be a false economy and some have already moved to scrap em in favour of the traditional manned check outs. Plus you usually need to have at least one staff member manning the self service check outs for all the times peeps buy alcohol or if something blorks up.

35, don’t work trials already perform basically the role you advocate? You have people agreeing to do a sort of probation period whilst being paid the usual benefits by the DWP, and many get jobs out of it. My contacts who work in the job centre tell me they feared the system would be used by unscrupulous employers, but this turned out not to be so.

As for the minimum wage. It may not work in theory but it works in practice. There was mass unemployment in the 80s too.

39. Name Required

35. paul ilc

“Perhaps, but remember that the employer will have all the hassle and cost of recruiting another such worker.”

I can’t imagine recruitment would be difficult considering the benefit “reforms” taking place and the fact that the Jobcentre will force them to apply for the job. It may still work out cheaper overall given they will be paying below the minimum wage continuously. Seems to me the end result would be to create a new unofficial de facto minimum wage.

“If the employee has proved his/her worth, they might well be kept on.”

Why would the employer want to do that when they can just get another long term unemployed person and pay them below the minimum wage?

“And in any event the employee will have got some useful work experience, which is more than they had before…”

Not much use to them if employers keep replacing them with other long term unemployed people as soon as they are required to pay them the minimum wage.

@21. Steady on. Subhuman? Do you really want to be using that Nazi-esque language? Your post reads like a parody, if it weren’t for your comment immediately below that. Tories complain when you call them revolting, subhuman, sociopaths, and vile? Oh sure they do! But then they’re Tories eh, they clearly have to be revolting, subhuman, vile sociopaths, because it’s written on every Tory membership card. Which is why the Tories got 11 million votes at the last election. Jeez.

It’s not even as if the post that provoked this orgy of demonisation even advocated abolishing the minimum wage – not that it would have deserved calling its writer “vermin” and “subhuman” if it had – it merely posited an uncomfortable hypothesis (“If Butler is right…”) that removing MW legislation might lead to extra jobs below MW level. It invited a debate, rather than asserting it as fact.

Is this going to be the standard of debate on the Left? “You’re a subhuman – piss off”?

@23 “Also, if the Minimum wage was scrapped, wouldnt workers be entitled to more tax credits? So the cost to the state would actually INCREASE?”

Hope you will understand I’m engaging in debate and am not an evil misanthropic untermensch or whatever insult might be thrown at anyone who seems right-wing or even proposes a right-wing viewpoint as adovcatus diaboli for the purpose of stimulating argument.

The obvious retort to your post is that you revise the benefits system so that it pays to be in a job on, say, £4 an hour. You might actively seek this work out, because you probably end up on benefits equating to £3 an hour instead.

What is the rebuttal or answer to that sort of retort? I don’t necessarily agree with it, but it seems a poor straw argument to say “If you abolish NMW it will necessarily cost the state more in tax credits” – because it won’t necessarily do so – it is if you like a false premise on which to place the MW defence. In lieu of it, what do you then say?

@33. Tim J: “Doubt it. Stores where there are self-service check-outs have fewer staff on check outs.”

Shops that use self-service check-outs are trying to drive down costs. If customers perceive that the business is driving down costs (and you can’t get a clearer signal than self-service check-outs), they’ll read the signal. If the shop is cutting costs on checkout, what else are they cutting? Is my speciality range meat pie made at the farm the real thing?

Is this going to be the standard of debate on the Left? “You’re a subhuman – piss off”?

New here, I presume…

Do they? Is that true? I think you will find that in every supermarket you have ever been to not all the tills are working all the time. Some are on at peak time with a select few on ‘all day’. What has happened is that staff, mostly part time have been moved to peak times.

I’m not sure this is a controversial point – self-service checkouts are a substitute for manned check-outs. Stores that have more of the one will have fewer of the other. This isn’t actually a minimum wage point necessarily. Stores where I live (outside London now) don’t have self-service checkouts. Stores where I work (central London) almost invariably do. That’s because the cost of labour in London is higher, giving supermarkets an incentive to switch labour for technology.

Shops that use self-service check-outs are trying to drive down costs. If customers perceive that the business is driving down costs (and you can’t get a clearer signal than self-service check-outs), they’ll read the signal.

All firms are (or should be) trying to drive down costs. If you’re argument is that supermarkets that use self-service checkouts inevitably provide sub-standard produce I think you’re over-reaching.

Given that the minimum wage is in force at the moment, we are already paying people more than companies would be willing to pay and no one seems too worried.

Well that’s rather the argument that we’re having isn’t it? Butler’s argument is that companies aren’t paying more than they’re willing to, and that they simply don’t employ people that they would have paid less than NMW to.

It could only make sense if we simultaneously introduced some sort of universal citizens income. If that were set at some reasonable level- say £100 pw, the minimum wage could be removed and we could still have a fair society. In the absence of that it’s just plain exploitation and lunacy.

@11. Falco

they are are they. The mentally ill, semi disabled, those nearing retirement and single parents struggling with bringing up children on their own would all benefit from a dose of a wage at two pound an hour.

I don’t think so they would become work fodder for big comp[anies who0 would lay off more expensive.

The taxpayer would have to top up incomes because people wouldn’t have enough to live on.

Tories like you need to think before you clunk your mouth inbto gear.

@43. Tim J: “If you’re argument is that supermarkets that use self-service checkouts inevitably provide sub-standard produce I think you’re over-reaching.”

Nope. I was talking about signalling. If a company adopts self service anything, it signals that it is going down market. “Stack the shelves for 20 minutes, and get 10p off every tin of tomatoes.” Going down market may be economically efficacious but I am less inclined to spend with them.

I have never used Starbucks but at least the transaction is face to face.

@25 Richard W

“If all we were worried about was demand, the government handing out tenners on street corners would have the same effect.”

Funnily enough this would be more effective than QE3 as the money would probably actually make it into the real economy.

@41

The obvious retort to your post is that you revise the benefits system so that it pays to be in a job on, say, £4 an hour. You might actively seek this work out, because you probably end up on benefits equating to £3 an hour instead.

What is the rebuttal or answer to that sort of retort?

Living costs.

49. Charlieman

@47. Jon: Quoting Richard W: “If all we were worried about was demand, the government handing out tenners on street corners would have the same effect.”

“Funnily enough this would be more effective than QE3 as the money would probably actually make it into the real economy.”

And further, no human being can comprehend what you are saying,

If a company adopts self service anything, it signals that it is going down market.

Have you been to central London? It’s virtually ubiquitous.

“Putting a floor under wages means that if they are going to have to maintain competitiveness then they are going to have to do it through genuine improvements in technical efficiency, investment in more sophisticated technology.”

Yes, lovely. And what does this investment in technical eficiency and sophisticated technology do? Reduce the demand for labour of course, meaning that there will be more unemployment.

Jeebus, this is what we opponents of the minimum wage have been saying for years. Make labour more expensive and it will be substituted out in favour of capital. This is the whole damn thing that’s wrong with the minimum wage!

@51 Resist productivity gains to retain demand for labour? That sound suspiciously like Luddism.

New technologies making old methods of production obsolete and cutting off former workers from their income is a problem with a system of wage labour, not particularly the minimum wage.

Tim dear, the existing minimum wage doesn’t really provide enough to live on.
And you want to get rid of it? What went wrong with you and when?
I really feel sorry for these people, as they are deeply disturbed and must never have experienced the real, human joys of life. Or I would do, if they weren’t hell-bent on inflicting on kicking the already prone to create some sort of insane utopia for the already-rich, who are so rotten inside they can’t really enjoy their completely unecessary and unwarranted riches anyway. My detached pity is only equal to that i feel towards a mosquito before I am forced to dispatch it, after all it knows no better. But I can’t let it drink my blood, and it has no choice but to try to do so.

Tim J

I’m sure there’s an element of truth to what you say re: cost of labour in central London. But there’s also the element of typical basket size. I’d imagine central London has a far higher percentage of people who nip in for a sandwich & packet of crisps, so the self service checkouts are naturally more suited for that purpose.

I hate the things and find them more inconvenient. And I doubt I’m alone, which leads me to believe the only reason tesco implement them is to save money on staff. Question is, how low would wages have to go to ensure they employed human beings?

I was discussing this with my brother a few months back and he called me a luddite for wanting them thrown in the sea. I’m not sure the parallels are the same, as I think there is no way 10 self service checkouts could compete in handling the traffic that 10 fully manned checkouts achieve. I may be wrong though: it would be interesting if anyone’s actually researched this?

Tim J @ 43

Well that’s rather the argument that we’re having isn’t it? Butler’s argument is that companies aren’t paying more than they’re willing to, and that they simply don’t employ people that they would have paid less than NMW to.

Well that is simply not true though, is it? We both know that there are more people in employment than ever before in our history. We both know that unemployment was higher during the Eighties when no minimum wage existed and we both know that many lower minimum wage European Countries have higher unemployment than us. Are we to ignore the history of the last fifty odd years to ahoehorn this tawdry report?

You have stated that this affects less than 10% of the workforce directly. The people on the lowest rungs ofour society. You say this is not something you support and I take you on your word with that. You also say that you are not keen on getting into a moral debate and to be blunt I am not suprised.

However, this all goes to what I have said repeatedly on this blogg. It appears that the Tories deliberately seek out the weakest members of society to kick seven shades of shit out of them. Surely you can concede the point that this is intended to punish the poor for the crime of being poor, by people who wouldn’t piss in a cup for six quid an hour? Can you at least understand why this looks like a pretty vile policy?

Unfortunately the proceeds of every technological productivity advance have gone straight into the pockets of the aforementioned sociopaths. If they had been shared more equitably we wouldn’t be in this mess.

54 – I prefer having petrol station attendants too (they still have them in most of Africa) because I don’t like self-service petrol pumps. Unfortunately, as it becomes cheaper and more efficient to substitute technology for labour, that’s what happens.

I think there is no way 10 self service checkouts could compete in handling the traffic that 10 fully manned checkouts achieve

But is that the right comparison? How many self-service checkouts can you run for the same price as a manned till?

Tim W @ 51

Jeebus, this is what we opponents of the minimum wage have been saying for years. Make labour more expensive and it will be substituted out in favour of capital. This is the whole damn thing that’s wrong with the minimum wage!

And yet in Spain they have unemployment in the late teens and close to twenty percent? On the other hand, we have seen employment rise. Dress it up however you want Tim, the real reason you cunts hate the minimum wage is it gives those at the bottom some dignity.

Tell you what, Tim. You are so convinced that the minimum wage is too high. Why not go to one of the places that pay the minimum wage and snatch the extra money from their hands, see how strong you really are, without your keyboard o hide behind.

@57

There’s a few things I’d look at:

1) £ Revenue per hour
2) Effect on footfall/ customer service perceptions (“I won’t go there, too long queues” and “I can’t work the tills”…I’d imagine this is especially high at the moment amongst your highest revenue customers, though this is likely to change)
3) Square footage taken up by the tills
4) Cost of running tills and supervisory employees

But I fear we’re slowly edging away from the point of the article…

Well that is simply not true though, is it? We both know that there are more people in employment than ever before in our history. We both know that unemployment was higher during the Eighties when no minimum wage existed and we both know that many lower minimum wage European Countries have higher unemployment than us.

None of that means that the NMW doesn’t increase unemployment at the margin. Really, it just doesn’t. I might just as well point to the fact that unemployment was much lower in the 1950s when there was no NMW. Correlation is not causation, post hoc non est propter hoc.

Surely you can concede the point that this is intended to punish the poor for the crime of being poor, by people who wouldn’t piss in a cup for six quid an hour?

Look, this sort of argument would be a lot more interesting, and a lot more illuminating to boot, if you refrained from poisoning the wells. I accept (obviously) that you are in favour of a NMW because it raises the earning power of the poor, and that’s a perfectly reasonable position to take. But there is an equally moral and equally reasonable argument that, by pricing the worst off in society out of employment it actually harms those worst off. If that is the case, and there is academically respectable research to support it, then the right thing to do is to question whether there’s a better way of achieving the same end. Say, by taking a view on what we consider to be a minimum wage and then topping up wages that fall below that by means of tax credits.

Ignoring what your political opponents have to say on the grounds that they are just evil and want to hurt poor people because they’re evil is intellectually infantile.

And yet in Spain they have unemployment in the late teens and close to twenty percent?

They’ve got a national minimum wage too and all.

BTW, I would abolish the minimum wage in its entirety…..and I would replace the entire welfare state with a citizens’ basic income.

Everyone just gets this amount of cash, once a month, from the State. And that’s it, no tax credits, no state pensions, no unemployment pay, no housing benefits, nada.

Anything else you want over this basic subsistence minimum you go to work for at whatever rate you can negotiate with anyone willing to employ you.

Tim J @ 60

None of that means that the NMW doesn’t increase unemployment at the margin. Really, it just doesn’t. I might just as well point to the fact that unemployment was much lower in the 1950s when there was no NMW. Correlation is not causation, post hoc non est propter hoc.

Tim, the 1950s is a long, long time ago when full employment was a political conviction for both parties. We had National service and Nationalised industries and fewer women in the workplace. I get the point you are getting at, but in sheer numbers, we have more people in employment than ever and the minimum wage is no barrier to that.

Ignoring what your political opponents have to say on the grounds that they are just evil and want to hurt poor people because they’re evil is intellectually infantile.

Tim, I do not have a problem with everything the ‘Right’ stand for. I am sure I could name dozens of right wing policies that I find legitimate, even if I disagree with them. There are those on the Right who believe in National Service for example, I do not, but I can fully understand why those on the Right find it appealing. Believing in National Service does not make you a bad person, per se, it make you ‘wrong’ in my opinion.

Tim, with this policy (that you don’t support, remember) is that it appears to ascribe a failure in the labour market to wages at below any reasonable rate and is around the level where most people would baulk at earning. No business is really getting of the ground on a basis that you can turn a profit on your workforce earning three quid and hour but a six quid it looks uneconomic. If someone came to you with a business plan like that looking for investment you have him thrown out of the building! The arguments put forward seem really idiotic to me and I am sure most people would agree. We need to cut wages to the poorest people in society to halt the spread of automation? That is nonsense Tim and you know it and the writers of this report know it too. Technology advances Tim and will move into industry and there ain’t a thing we can do about it.

The way to beat it is stay ahead of the curve; to make sure the workforce is in front of the game. If automated tills are the future, then it is going to happen, Tim and NOTHING is going to stop it and cutting the minimum wage to food stamps and a warm blanket is going to prevent it.

Tim, if I sat you in a chair and shone a huge light in your eyes after a good ten minutes waterboarding you would admit that the minimum wage is not going to affect technology one way or another, so why pretend Tim?

Tim @ 61

They’ve got a national minimum wage too and all.

Yes, Tim and at a much lower rate than we have, yet it has failed to create jobs, the very jobs that lower wages are supposed to create.

NR @ 39:

“I can’t imagine recruitment would be difficult…”etc

I suspect you have little experience of business or recruitment.

The state education system is so dire that many candidates are – tragically – innumerate and subliterate, making recruitment difficult from the start. Then there is the time and money spent on reviewing/amending job descriptions, advertising, shortlisting, interviewing, documenting each interview to ensure and evidence fairness, taking up references, preparing contracts, arranging induction, establishing objectives, setting up payroll and PAYE, reviewing employee during/after probationary period, confirming employment…

No employer does all that unnecessarily. It’s very expensive.

“Why would the employer want to do that when they can just get another long term unemployed person and pay them below the minimum wage? ”

See above for the answer. Think how long all the tasks above take. If someone is performing adequately, you keep them on. One of the pleasures of employing and managing people is watching them grow and develop. The vast majority of private sector employers do not regard employees as exploitable and disposable, and they enjoy seeing people thrive at work because happy employees usually mean a more successful business.

“Not much use to them if employers keep replacing them with other long term unemployed people as soon as they are required to pay them the minimum wage.”

Of course it is of some use to them. Most people enter or re-enter the jobs market by taking a series of temporary and low paid jobs initially. Would you prefer that such people are parked on benefits for the rest of their lives?

@ 63:

“Tim, if I sat you in a chair and shone a huge light in your eyes after a good ten minutes waterboarding you would admit that the minimum wage is not going to affect technology one way or another, so why pretend Tim?”

Erm… what?

Someone earning the Australian minimum wage (AUD 15/hr, approximately GBP 10/hr) would be better off than most UK adults.

Raising the minimum wage would, at some level of increase, reduce jobs. What is this level? I don’t know, but I note that Australia has a lower rate of unemployment than Britain.

@67. That Oz is at the peak of a massive boom driven by China’s insatiable appetite for primary commodities might have something to do with it…..

What utter nonsense – firms have nothing like a surplus of money – why are so many businesses going bust at the moment?

The NMW destroys jobs by making it illegal to employ someone whose productivity is not worth the decreed NMW level. People should be paid according to their productivity. Jobs do not grow on trees. If your productivity is not worth the NMW then you need to find yourself a Charity willing to subsidise employing you – because no sane employer is going to employ you if it is going to end up costing them money than it brings in. That is something that the NMW proponents do not want to hear, but it is 100% harsh economic reality.

Furthermore, the NMW is most harmful to the small businesses that we will need to grow going forward, as they are far less able to absorb the cost – The NMW will help Tesco because it drives the local grocer out of business.

Please sign my e-petition to scap the minimum wage: http://epetitions.direct.gov.uk/petitions/27126

The argument that scrapping the NMW will reduce aggregate demand is complete tosh – Unemployed people have ZERO effective demand, and the NMW increases unemployment, as sure as night follows day.

Look at the heartbreaking story of how imposing a NMW level on American Samoan has utterly devastated their whole economy: http://www.youtube.com/watch?v=_LaPGIIAyk4

71. Leon Wolfeson

@70 – Prove it. You’re claiming a physical process (orbital mechanics) and Human economics work on the same level, which is bluntly stupid.

Typical 1%er call for a rush to the bottom, reducing wages for the 99%.

Leon @ 70:

You’re defending with stupid reasoning because you know your argument is lost.

Put it this way: Imagine if the NMW was £1000ph. Do you suppose you would find someone willing to pay you this rate, or do you think that you would in fact be unemployed too as you are not worth this wage rate?

So if £1000pm is “too high” then what isn’t? £999ph? £99? £9ph? How do you arrive at a rate that doesn’t cause unemployment?


Reactions: Twitter, blogs
  1. Ian Adamson

    Scrapping/cutting the minimum wage "economic lunacy" http://t.co/Hy9CWSK I'd add "morally disgraceful" as well…

  2. John Band

    Scrapping/cutting the minimum wage "economic lunacy" http://t.co/Hy9CWSK I'd add "morally disgraceful" as well…

  3. Matt McG

    Scrapping/cutting the minimum wage "economic lunacy" http://t.co/Hy9CWSK I'd add "morally disgraceful" as well…

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    Why cutting or scrapping the minimum wage is economic lunacy http://t.co/L0CBePo

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    A rebuttal to Eamonn's piece on minimum wages from Liberal Conspiracy… one year after Eamonn's piece. Jaysus. http://t.co/MTfaH7K

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    Why cutting or scrapping the minimum wage is economic lunacy http://t.co/L0CBePo

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    Why cutting or scrapping the minimum wage is economic lunacy http://t.co/L0CBePo

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    Why cutting or scrapping the minimum wage is economic lunacy http://t.co/L0CBePo

  9. Pat Raven

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    Why cutting or scrapping the minimum wage is economic lunacy says @joncstone – responding to hard-right http://t.co/mYxxELm

  12. Teresa Massad

    Why cutting or scrapping the minimum wage is economic lunacy says @joncstone – responding to hard-right http://t.co/mYxxELm

  13. DPWF

    Why cutting or scrapping the minimum wage is economic lunacy says @joncstone – responding to hard-right http://t.co/mYxxELm

  14. Purbeck Pashmina

    Why cutting or scrapping the minimum wage is economic lunacy http://t.co/L0CBePo

  15. DarrellGoodliffe

    Why cutting or scrapping the minimum wage is economic lunacy | Liberal Conspiracy http://t.co/EhgFlw8 via @libcon<<the madness of the right

  16. Jason C Healy

    “@sunny_hundal: Why cutting or scrapping the minimum wage is economic lunacy says @joncstone – responding to hard-right http://t.co/cfc8xNd”

  17. Chris Roberts

    Why cutting or scrapping the minimum wage is economic lunacy says @joncstone – responding to hard-right http://t.co/mYxxELm

  18. Rep in the Region

    Why cutting or scrapping the minimum wage is economic lunacy says @joncstone – responding to hard-right http://t.co/mYxxELm

  19. Helen Barnard

    Why cutting or scrapping the minimum wage is economic lunacy says @joncstone – responding to hard-right http://t.co/mYxxELm

  20. Jon Stone

    Why cutting or scrapping the minimum wage is economic lunacy says @joncstone – responding to hard-right http://t.co/mYxxELm

  21. Daniel Harley

    The Liberal Conspiracy blogpost arguing in favour of keeping NMW looks like it's already been destroyed in the comments: http://t.co/yji92aT

  22. Jon Stone

    I have an article on Liberal Conspiracy today: Why cutting or scrapping the minimum wage is economic lunacy http://t.co/fLYVeGi

  23. Jeremy Meyer

    I have an article on Liberal Conspiracy today: Why cutting or scrapping the minimum wage is economic lunacy http://t.co/fLYVeGi

  24. bryan

    Why cutting or scrapping the minimum wage is economic lunacy | Liberal Conspiracy http://t.co/EBqWEXE via @libcon

  25. UKFreeNews

    Why cutting or scrapping the minimum wage is economic lunacy says @joncstone – responding to hard-right http://t.co/mYxxELm

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    Why cutting or scrapping the minimum wage is economic lunacy says @joncstone – responding to hard-right http://t.co/mYxxELm

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    Why cutting or scrapping the minimum wage is economic lunacy http://t.co/L0CBePo

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    @WiLL_Rea here's Will's bullshit theory http://t.co/kcVYQrES





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