The Minimum Wage is yet another proof that the Government has no grasp of economics; it is set out with the goals of reducing exploitation and increasing opportunity and it will never achieve either.
Firstly it is profoundly unfair. It is set at these levels: £6.31 if you are over 21, £5.03 if you are aged between 18 and 20, and £3.72 if you are under 18. Why is someone worth 25% more for being over 20 and 70% more if they are 21 rather than 17 ¾? Moreover, the system makes no allowances for geography, whereby the relative value of the hourly wage has different purchasing power. This system clearly advantages Northern 21 year olds over Southern 17 year olds, with no regard to their value within the workplace. Furthermore, it makes no allowances attached to the hours worked, whereby late night workers who may require taxis home are clearly put at a disadvantage over those day shift workers. Age/regional and work type discriminations abound in a system that imposes homogeneity.
Secondly, it necessarily introduces a higher cost in bureaucracy as it has 3 thresholds, 4 if you include the minimum wage of £2.68 applied to apprentices and thereby pushes up business transaction costs and reduces efficiencies and competitiveness.
Thirdly, by reducing employers’ flexibilities it acts as a disincentive to employ in the first place. Necessarily, some business will only be able to pay, or an employee will only be worth £6.30 and will therefore be removed from the workplace and kept on the dole, where they will be paid less than the amount that they would have received at that place of work. This means that the least ‘advantaged’, i.e. the ones that this system was apparently designed to help, are even less off as they are denied opportunity. By keeping out this sector of the labour force, business will struggle to expand, having a knock-on detrimental economic effect.
Fourthly, this system removes the incentive to act with initiative and work on a commission based system. Service industry workers may well prefer to earn their money via tips, but this choice is denied by them, as the employer clearly has an incentive to pay the minimum wage and keep any service charges for himself. If all the restaurants in the neighbourhood act similarly, then there will be no competition in the labour market, and standards will depreciate hurting the economy as a whole.
There will always be people who will abuse any system, there will always be unscrupulous types. There will be, right now, people being paid £2 an hour within a few miles of you, but because they are out of the system and off the radar, they have all their rights and protections removed from them. The system that requires £6.31 an hour actively encourages these types of businesses to drop out altogether, and as they do so they make even more people vulnerable to exploitation.
Many people may feel inclined to say ‘but it’s something though, isn’t it? It’s not perfect, but it’s a start’, or things of that nature’. My point is, though, that an arbitrary one-size-fits-all will always be wrong and open to abuse. Solutions cannot generate inequalities or provide incentives for exploitation: they must be flexible mechanisms that promote employee choice.