A Living Wage or a Death for Small Enterprise?: A case against the UK Minimum Wage

Economic
Monday, January 20, 2014
Luke Springthorpe

Read the full Bow Briefing Paper Here.

The proposed above inflation hike of the National Minimum Wage is the final piece of proof that affirms what  Bow Group members  have long asserted: George Osborne and the government are artificially  manipulating the economy for political gains in the run up to 2015, to the detriment of its medium to long-term development.

To level criticisms at George Osborne calling him an avowed Keynesian is unfair. He is not, and in past editions of the Bow Group’s journal Crossbow, esteemed commentator Samuel Britain doubted Osborne’s familiarity with Keynes’ General Theory. Nor, however, is he a ‘modern’ conservative (by which I mean a Thatherite market liberal.)  A Keynesian uses policy levers with the end goal of stimulating demand. A conservative leans towards reducing the role of government in every policy decision. Whilst I do not doubt that George Osborne wishes to lean towards the latter, his willingness to surrender to populism in an attempt to occupy the ground of the Labour party, as opposed to taking the fight to the Labour party, has become concerning.

Last week’s minimum wage  announcement comes on the back of a number of measures that would be deemed populist in so far as their economic rationale is dubious, whilst they hold a more obvious electoral benefit. Such measures now include a steadfast refusal to even contemplate revising any welfare provisions for over 65s, inflating the property market via Help to Buy, raising the banking levy in every budget and now supporting the inflation busting  hike of the national minimum wage.