So the introduction of the minimum wage is one of the glories of Nu Labour’s management of the economy eh? Raising the incomes of the working poor with no ill effects eh? As we were reminded by Mr. S&M, this is not quite true:
Tony Blair today announced plans to cut the jobs and hours of low-paid workers.
He’s going to raise the minimum wage, from £4.85 an hour to £5.05 in October. This as the Low Pay Commission recommends in its report today; it also recommends a rise to £5.35 in 2006.
The
first rule of economics, of course, says that if you raise the price of
something, you’ll reduce demand. And this means shorter hours and job
losses for some of the low paid.
That’s what theory says should happen, what about what actually did happen?
The introduction of the minimum wage led to employers cutting the
number of hours that staff worked, new research showed yesterday.
In a paper presented at the annual conference of the Royal Economic
Society, Professors Mark Stewart and Joanna Swaffield claim that paid
working hours have fallen by between one and two hours a week for
low-income staff.
My, my, what a terrible surprise that is, economic theory and empirical evidence actually agreeing with each other! Remember, too, that this cut in hours occured at the same time as unemployment fell to 25, 30 year lows, many companies screaming about the difficulty of finding labour.
Let’s all clap hands and believe in fairies shall we, our Lords and Masters in Nu Labour apparently having as much knowledge of the science of economics as Tinkerbell herself.
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