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.
Note that this is the Low Friggin Pay Commission itself, not some rabid Tory at Party Conference.
And note also that standard economic theory tells us that this will be so.
Whatever the minimum wage is, it will be most binding (note, \”most\”. If the min wage is 2p an hour then it\’s not binding on anyone at all as no one works for that or is offerend that. If it\’s £100 an hour then it binds on just about everyone) on those with the lowest and smallest skill set. Leaving aside those with physically or mentally limited skill sets (where in some cases, like I think Remploy, the min wage isn\’t actually binding) this will be the young and untried.
So, if the min wage is in fact a bind, then we\’d expect to see it in the employment prospects of these young and untrained, untried. We are seeing something happening to the job prospects of the untrained and untried, something more than what is happening to the job prospects of those with experience.
It\’s a not unreasonable conclusion therefore that the min wage is becoming a bind on their employment prospects.
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.