There should be greater caution in setting minimum wages, says IEA expert

From: Think Tanks
Published: Tue Oct 26 2021


Professor Len Shackleton, Editorial and Research Fellow at free market think tank the Institute of Economic Affairs, commented on the Chancellor's plans to raise the minimum wage to 9.50 an hour

The labour market is surprisingly healthy at the moment, confounding the predictions of those expecting a massive rise in unemployment after the ending of furlough. We have healthy levels of employment, record vacancies and rising pay.

However, smaller businesses in particular face a worrying time. With tax increases already pencilled in - including the planned increase in national insurance contributions - there should be greater caution in setting minimum wages.

The government may be calculating that higher pay may mean more tax revenue and less paid out for in-work benefits, but such modest benefits to the public purse may be negated if unemployment rises as businesses cut back on recruitment.

It is disturbing to see that the Living Wage Foundation apparently has as much, if not greater, influence than the Low Pay Commission. With the Opposition in favour of further rises, it is likely that we will see a bidding war at the next election.

Notes to editors

Contact: Emily Carver, Head of Media, 0771594273

IEA spokespeople are available for interview and further comment.

Company: Think Tanks

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