Monday, October 03, 2011

Statement of the bleeding' obvious

Today's statement of the bleedin' obvious comes from the Low Pay Commission...
The minimum wage may be pricing young people out of work because employers are finding it too expensive to give them their first job, Government pay advisers have said.

Firms may be reluctant to create jobs by recruiting inexperienced staff because they are put off by the increased wage bill, the Low Pay Commission has suggested.

No, really? You surprise me.

You mean, if you make employing people more expensive, then you will have fewer employees? Tell me, o sages of the Low Pay Commission, what are your views on increasing employers' NICs?

Oh, they might slightly contribute to unemployment too? Genius! Who'da thunk it...?


UPDATE: Timmy elaborates on why the Low Pay Commission might be understanding this now.
What is so annoying about all this is that we told you so you fucking fools. We said that if you bring a min wage, one which continually rises above general wage inflation, then you will get to a point where it does severely crimp employment prospects. And it will be first evident among the young, untrained and untried.

So, happy now that it’s happened?

The truth is, the minimum wage is almost certainly too high already. Worthwhile Canadian (search for it yourself!) did some work a couple of years back showing that as long as the min wage was below 40% of average (I assume, from memory, mean) earnings, then the unemployment effect was minimal. When it goes over 50%, then the effects become more substantial.

Mean hourly earnings for men are now 16.25 an hour. For women 13.73 an hour (ASHE 2010).

Part time they’re 12.06 and 10.64 an hour.

The minimum wage at 6.08 an hour (the 2011 number) isn’t affecting full time employment all that much and it’s just getting into the range where it might start having substantial effects on part time employment. So far so good.

But, the youth rate is £4.98 an hour. And what are mean wage rates for this group? Again from ASHE: for 16-18 year olds, £4.84 and for 18-21 year olds, £7.62 (both male).

So, in that 18-21 year group, we’ve a minimum wage which is 65% of the mean wage. Well into our territory where we expect to see substantial employment effects. For 16-18 year olds, it’s 3.68……76%.

Are we seeing substantial emplouyment effects? Well, certainly, all the awailin’ about NEETS seems to show that we are.

And you know what kiddies? We fucking told you so.
Official figures last month showed that almost 1 million of the 2.5 million people officially counted as unemployed in Britain are aged between 16 and 24.

As the man said, we did tell you so.


Anonymous said...

This one has been bouncing around for a long time. What is the real effect of minimum wages? or high fixed labour costs on unskilled work?

As a lower-middle class grammar school boy (whose parents had no spare cash at 13 I had more cash in my pocket at the end of the month than my Dad), I was 'ruthlessly' exploited for pitiful wages from the age of 11 on paper rounds, going through Saturday morning shop assistant, petrol pump attendant, floor cleaner in Boots, junior baker, van driver for ever less pitiful sums (still pitiful but less so).

So you can imagine my reading. The important thing is working, getting the habit and the experience; for example, of turning up on time and in condition for the job in hand, a 'life skill' not always abundant these days.

Yes, I now run a company and I am shocked of the cost of employing unskilled people who need training in the basics and who make next to no contribution in their exceptionally long 'lead' time. So we squeeze internally and do it ouselves. The staff prefer it and not because they might get more out. The hate having to help someone they see as an expensive waste of space.

Attitude is one that has to come with the person, but setting high fixed costs has the exact opposite result to the desired one and is determined politically.

A bit like cutting corporate income tax. Taboo even if it works.

Trooper Thompson said...

"What is the real effect of minimum wages?"

The real effect is unemployment. If you fix a price above the market rate, then you get an unsold surplus.

This is not open to any debate, it is necessarily true. The only way for a minimum wage law not to cause unemployment is if it is lower than the market rate - and bear in mind that the market rate is not uniform across different jobs or people.

MattG said...

"The only way for a minimum wage law not to cause unemployment is if it is lower than the market rate - and bear in mind that the market rate is not uniform across different jobs or people."

How to discredit the entire concept of a minimum wage in one sentence. Nicely done!

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