Neil Collins at the Telegraph is almost there, but not quite:

The minimum wage was going to be the measure that
triggered a rise in unemployment and a new surge of inflation. Jobs at
the bottom of the pay scale would disappear, since by robbing the least
qualified of the chance to work for very little, they would be unable
to work at all. Meanwhile, those slightly higher up the scale would
demand restoration of their wage differential, leading to higher labour
costs and higher prices.

However logical these
arguments were, it hasn’t turned out quite like that. Unemployment has
disappeared into those ridiculous public sector jobs, while inflation
has been recognised as a disease of money. In short, the gains for the
beneficiaries appear to have outweighed the pain elsewhere.

Yesterday
the Prime Minister, his Chancellor, the Leader of the House of Commons
and the Northern Ireland Secretary all announced what they’d already
leaked, the crowd-pleasing news that the minimum wage is to rise from
£4.85 to £5.05 an hour in October, and to £5.35 in autumn 2006. Do they
think there’s an election on? Presumably they believe these rates are
the minimum needed to keep body and soul together. Yet such is the mess
of the tax and benefits system that anyone earning the current minimum
wage will pay 21p in income tax and National Insurance on every extra
pound after just 19 hours work a week. After 26 hours, our employee
will lose 33p in income tax and NI from every extra pound of income.

By
this time next year, it’s a pound to a penny his position will be
worse. If Gordon Brown increases tax thresholds at all, he’s highly
unlikely to raise them by more than his preferred measure of inflation,
which will be less than the 4.2pc rise in the minimum wage.

An
honest chancellor would set the threshold for paying income tax (and
NI) so that anyone working a 40-hour week on the minimum wage would be
able to keep what he earned. Instead, Mr Brown decides who are the
deserving poor, and obliges them to claim their own money back. Once
they’re on benefits, they won’t dare vote for anyone else, which is
exactly the way Mr Brown wants it.

Sound stuff on the taxation but a little weak in the basic economics. He’s comparing what was happening then to what is happening now….you may think that’s fair enough but I don’t. We should be comparing what would be happening now without the minimum wage with what is happening now with it….that’s the only way you can see the effect of the policy.

For example, has the youth unemployment rate declined as quickly, slower or faster, than the adult unemployment rate? If slower, then we might say that the initial predictions of theory were correct….the young and untrained are being priced out of the market by the minimum wage.

Sorry, but it’s a rugby weekend so I’ll leave checking the figures to the reader :0)

Update: Quinn comments and it’s worth bringing up here above the fold:

Of course you are right that the theory regarding the minimum wage
tells us that it will cost jobs, and that we have to compare where we
are now with where we would have been without the
minimum wage to really judge its impact; it may be that the
unemployment caused by the minimum wage has been masked by other
factors.

But I have always wondered that, although logic suggests a minimum
wage will cost jobs in the short run, could that be outweighed in the
long run? If those who don’t lose their jobs have a higher income as a
result of the minimum wage, and since they are the poorest in society
and so have the greatest marginal propensity to consume, could the
resulting increase in demand actually create jobs, long term?

It is just a thought, informed by undergraduate economics from a few
years ago; I am happy to receive an economics lesson on the matter!

I’m not sure that I am the person to give an economics lesson, you might want a real economist for that (and do go read that, Chris covers it very well).

To address the short term long term thing, I think it actually works the other way round. Precisely because of the marginal propensity to consume, the rise will provide a short-term boost to the economy. Yet we’ve changed the relative prices of low skill labour to capital (or high skill labour, offshore labour, many things) and quite obviously, if mainstream economics has any meaning at all, we are going to reduce demand for that low skill labour. But that is a longer term effect than the boost to this week’s wage packet and next week’s consumer spending.