Thursday 26 April 2012
Minimum Wage
Labour is a product. There, I said it. And I mean 'labour' with a small L, but it's at the start of a sentence. Labour (there we go again) is a product. You can make a chair and sell it to someone. Or you can sell your own labour to someone else to help them make a chair which they then sell. A lot of people either don't have the expertise, or the capital, or desire the risk associated with directly selling the things they make (be that a chair, a computer, a bit of software, legal advice etc) and so they sell their labour to an employer. But they are selling their labour.
Are there any other instances whereby people support a minimum price on a product? A handful of sad sacks of shit support the idea that a minimum wage of alcohol is a) a good way of deterring it's abuse and b) not at all scarily authoritarian nor a moral invasion by a political class that's more or less ethically barren itself. Most of the rest of us think this is a ridiculous idea because it harms the poor who might enjoy a drink but can only afford the cheaper stuff, whilst the more well off continue to drink whatever they want, safe in the knowledge that the alcohol they drink is not even close to the minimum price, but they can quaff whilst having the holier-than-thou conscience boost of knowing they're protecting the vulnerable from an early release from their boring and terrifying existence.
For those who haven't cottoned on to where I'm going with this, the idea of a centrally mandated price floor is crazy on all products - including labour. And for exactly the same reasons.
If we compare the cost of alcohol to the cost of labour, there is little in the way of differentiation. Neither directly affect those that are fortunate enough to exist on a higher spending level - if you're on a salary of £70k, what the minimum wage is has no bearing on your life at all, and if you prefer Hendricks gin to Tesco Value, a minimum price won't affect you. The volume of tasty, tasty gin that you drink might, though.
But what if you aren't? What if you're at the scraggier end of the socio-economic spectrum? If the government says to you "Hey, person, you're not allowed to drink this cheap alcohol for £3 anymore. It needs to cost £6. Trust us - it's for your own good!" then you have three choices. Either you drink it and suck up the fact you have to now pay more (option 1). Alternatively you could drink something that already cost £6 on the grounds that you might as well get better quality stuff if you're being forced to pay more (option2). Obviously this has a pretty maniacal effect on the cheap booze producers who now struggle to find a market, because no one in their right mind would choose option 1 as long as option 2 is available (besides which, option 1 is pretty bad for the consumer, of course). Or you simply can't afford £6 and don't drink anymore (option 3). This is bad for freedom of choice, and it's the government telling people that they'd rather they didn't drink than they drink cheaply.
Every single one of those issues is equally applicable to a minimum wage. Someone's labour might be viewed, by the market, to be valued at about £3 an hour. Of course, they may add more value than that to a business, but businesses need to make money, so simply doing that isn't enough. One's market value is a tricky thing to calculate (and one that, cruicially, cannot be calculated centrally, any more than an alcohol price can - the government isn't best placed to decide how much someone's labour is worth. I might be incredibly talented at plate spinning, but if no one wants to hire me to do it, my market value is very low). But what if the government says that now no company is allowed to hire you for less than £6 an hour?
Option 1 above occurs. That some companies will still hire people, but of course it costs them a lot more. This might mean they employ less people, or it might otherwise make this company less competitive, less profitable, less able to grow. But this is the best of the three options.
Option 2 is that the company will no longer ever employ people whose value is £3/hour, they'll always hire people who's actual value is closer to £6/hour - well, why not? They're going to be paying that anyway, so why not hire people who give you more for your money? This leaves a huge subsection of the potential employee market that's almost entirely unemployable in any situation other than one with an enormous labour shortage (ie a situation akin to World War Two, which saw massive strides in women working in production roles because there was a huge shortage of male labour as they were all off getting their legs blown off in France/Norway/Africa/Singapore/France Again/Germany.) With the EU allowing free transfer of people from less developed countries into the UK (As well as the general economic glumness going on at the moment) that's not the case. Incidentally, in a situation where there IS a labour shortage, you don't need a minimum wage to ensure good wages - companies will actively have to compete even for low-skilled workers, just as they currently do for more highly-skilled employees with sought-after abilities.
And then option 3. Ollllllld option 3. The one where no one gets employed, because the business won't employ someone for £6 when they add less than £6 of value to the business, per hour. No business would do that.
OF course, when the minimum wage is £7 or so, this won't actually affect too many adults - though it affects enough to be worthy of general hate or antipathy at least (as oppsoed to the general concensus that it's just absolutely the best thing since sliced bread). This is less the case for kiddywinkles, with the 16-21 bracket of people were hit the hardest - not during the recession, but during the boom time. Their employment almost entirely remained static, despite every other demographic going up. And this was all despite them having an even smaller minimum wage than everyone else. Why? Because they're also almost entirely useless from a productive point of view, and tend to have very few skills. This means that often they add very little value to businesses indeed (at least, at first) and thus their labour is worth very little. Again, when one combines this with a large supply of labour from overseas (and now also as a result of the recession), it spells bad times for the unskilled of the nation - the very people the minimum wage was introduced to help.
(Also, I have mentioned immigration a few times, but I wish to make it clear that I am an absolute advocate of the free movement of people. I'd liberalise it entirely, if I could - but then, I'm a skilled worker in a dynamic industry who's labour commands more than the minimum wage. The truth is that, of the 2m jobs that were "created" during the boom years of the mid ninties to the mid-late 2000's, 1.9m of them went to people born overseas.
If anyone really thinks that the minimum wage didn't contribute to this, they need to be reminded that people who move from abroad often have a lot more to offer an employer - not only are they generally older and more world wise (as few 17 year olds emigrate), but more skilled workers are more willing to work for less money than an equivalent native due to the relative wealth differences between the UK and other EU nations (and this is a problem for the native UK unskilled workforce due to option 2 above). But also, by their nature of being immigrants, they often have a lot more to lose than native Brits - far less access to benefits, as well as - obvious though it may sound - they've come all the way from across the seas to work here; They're less likely to jeopardise a job by being late or lazy, as that just invalidates their entire emmigration.)
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