Will Cameron freeze the minimum wage?

There is evidence that a reduced minimum wage would boost youth employment.

Today's Telegraph reports on speculation that David Cameron is considering freezing the minimum wage in an attempt to "encourage employers to hire more staff". The government is expected to make a formal announcement in two months, with the separate minimum wage rates for young people most likely to be frozen.

Although most of the left won't accept it, there is a reasonable discussion to be had about the effect of the minimum wage on youth unemployment. The Low Pay Commission, the body that advises ministers on the subject, recently noted "evidence that in difficult economic circumstances the level of the minimum wage may have had an impact on the employment of young people". International experience suggests that a minimum wage that is 50 per cent of the average wage is harmful to employment. But the rate for 18-20 year olds (£4.08 an hour) is currently 65 per cent of the mean wage and the rate for 16-18 year olds (£3.68) is 76 per cent.

At a time of high inflation (the annual rate of inflation is falling but prices are still rising by 3.6 per cent), freezing the minimum wage should be a last resort. But with youth unemployment running at over a million, the left can't afford to be dogmatic. We should go wherever the evidence leads.

As the Marxist economist Chris Dillow has noted:

The fact that jobs have been created since the introduction of the minimum wage is ... irrelevant. The test of the effect of the minimum wage is not: how many jobs have been created since it began? It's: how many jobs would have been created, had we not had a minimum wage?

If the Low Pay Commission concludes that a lower minimum wage would increase youth employment, then a temporary freeze may be the lesser of two evils.

George Eaton is political editor of the New Statesman.

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Donald Trump promises quick Brexit trade deal - but the pound still falls

The incoming President was talking to cast out Brexiteer, Michael Gove. 

The incoming President, Donald Trump, told the Brexiteer Michael Gove he would come up with a UK-US trade deal that was "good for both sides".

The man who styled himself "Mr Brexit" praised the vote in an interview for The Times

His belief that Britain is "doing great" is in marked contrast to the warning of current President, Barack Obama, that Brexit would put the country "at the back of the queue" for trade deals.

But while Brexiteers may be chuffed to have a friend in the White House, the markets think somewhat differently.

Over the past few days, reports emerged that the Prime Minister, Theresa May, is to outline plans for a "hard Brexit" with no guaranteed access to the single market in a speech on Tuesday.

The pound slipped to its lowest level against the dollar in three months, below $1.20, before creeping up slightly on Monday.

Nigel Green, founder and chief executive of the financial planners deVere Group, said on Friday: "A hard Brexit can be expected to significantly change the financial landscape. As such, people should start preparing for the shifting environment sooner rather than later."

It's hard to know the exact economic impact of Brexit, because Brexit - officially leaving the EU - hasn't happened yet. Brexiteers like Gove have attacked "experts" who they claim are simply talking down the economy. It is true that because of the slump in sterling, Britain's most international companies in the FTSE 100 are thriving. 

But the more that the government is forced to explain what it is hoping for, the better sense traders have of whether it will involve staying in the single market. And it seems that whatever the President-Elect says, they're not buying it.


 

 

Julia Rampen is the editor of The Staggers, The New Statesman's online rolling politics blog. She was previously deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines.