Should the National Minimum Wage Be Scrapped?

Eamonn Butler, Director of the Adam Smith Institute, a right-wing think tank, wrote an article in favour of scrapping the national minimum wage (NMW). He maintains that the worst who are affected by the NMW are ethnic minorities, unskilled workers and, most severely, young people.

Eamonn Butler
Eamonn Butler

This year has seen nearly 1 million 16-24 year olds stuck in unemployment, a depressing statistic which has not changed since last year. This means that a staggering 21% of 16-24 year olds are out of work, struggling to land their first job and who are being left helpless by the current government. The government’s recent Work Programme for those on Job Seekers Allowance (JSA) to make young people employable was a complete failure – based on existing youth unemployment statistics, forcing the most vulnerable to work for nothing did not help them find work. Could scrapping the NMW somehow make young people employable?

In a broadcasted debated on BBC Radio 5 live Breakfast, Mark Littlewood, Director of the Institute of Economic Affairs, argued that the NMW should be scrapped because it creates a barrier stopping young and inexperienced people from finding work. (At the time of the recording, the NMW was £6.08, but it is currently £6.31). Littlewood proposes that if the NMW was scrapped, this will encourage employers to hire employees, because they could hire them for however much they wanted below the NMW. At first glance, this seems like a recipe for exploitation. However, as Littlewood explains, many employers might feel that the nature of some work they need doing is worth less than £6.31 an hour. Many young people may also be more than willing to work for less than this amount, but are unable to offer to do so because of the NMW legislation.

Mark Littlewood
Mark Littlewood

Those who support the NMW may believe that a basic, absolute wage will protect unskilled workers from exploitation by big corporations, but in reality it can achieve the opposite effect. A minimum wage law increases the cost of employing low skilled or unskilled labour, meaning that less potential workers will be employed. Only a minority will earn a higher hourly rate. In the UK, the NMW has been steadily increasing and this could at least partly explain why 16-24 year olds are seeing all their hopeful job applications met with silence or the familiar “We regret to inform you that your application was not successful. We had a high volume of promising candidates etc. etc.”

The Institute of Economic Affairs, as a free-market think tank, does of course support the abolition of the NMW on principle. From a libertarian point of view, the cost of labour should not be a value fixed by the government. It should be ruled by an unregulated marketplace, by supply and demand, and by the free choices made between employer and employee.

On the other hand, scrapping the NMW on this ideological basis may be unnecessary and extreme. It is also not necessarily true that scrapping the NMW completely would resolve the UK’s unemployment figures. The minimum wage law should not remain absolute and set in stone, but should be dynamic and reflect the state of the economy. If young people are struggling to attain their first job or are dissatisfied by doing unpaid internship after unpaid internship, then lowering the NMW, without eradicating it altogether, could ameliorate the issue.

I myself have done a few unpaid internships, work placements and voluntary roles – I’m currently doing an unpaid internship as we speak. I’m willing to work full time for free, because I know that I’m gaining valuable experience, skills, connections and an over all increase in employability. Most unpaid internships are include full working hours and involve duties that a person would normally get paid to do. Some companies won’t even reimburse the intern’s travel and subsistence, so they actually end up out of pocket.

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Intern Aware are a group committed to raising awareness and tackling unpaid internships in the UK. They understand that internships are a reliable way to enter into the individual’s desired profession, but that many young people, those who cannot afford to work for free, are unfairly denied such opportunities. Intern Aware and other groups like them stress that unpaid internships are also illegal under minimum wage law – if you work a set number of hours and carry out specific tasks, however mundane, you are technically a worker and therefore entitled to a basic rate. These groups urge young people to contact the HMRC, claim back their pay and prosecute the companies which denied them pay for their hours of photocopying, coffee making and data entry.

There is, however, a way to crack down on the advertisement of illegal unpaid internships and stagnant youth unemployment. This would be to lower the NMW, for 16-24 year olds at least, to a figure which is sensible. (Exactly what this figure would be I cannot say, but there is not reason that it cannot vary depending on changing circumstances and based on region. The issue with the NMW is that it is national and does not vary between regions. One reason why unemployment rates are higher in the North East than in London, for example, is because the NMW is static and does not reflect regional differences in the cost of living).

It would be unreasonable to lower the NMW to, say, 10p an hour, since no one would work for that. You could make more money in a day looking for change down the sides of your couch if that was the case. But if someone who just left school or University wants to intern for £5 an hour, it seems unfair that an employer could not legally hire them for that rate of pay. A company may not be able to afford to take on someone full time for £6.31 an hour, but if they can afford to pay someone £3 an hour, and the employee happily consents to this rate, why should the government prohibit this arrangement? It is over-regulation at its worst. In conclusion, it might be pointless to scrap the NMW completely, but it could be beneficial to lower it.

3 COMMENTS

  1. “It would be unreasonable to lower the NMW to, say, 10p an hour, since no one would work for that.”

    Then it is uneccessary to have a minimum wage if it is to be 10p an hour. It is therefore “unreasonable” only because scrapping the law entirely would be cheaper to run.

    I wonder what the highest value of a minimum wage is which is not worth enforcing for the same reason? I bet it’s higher than 10p.

  2. Thought I should point out that there already are different “bands” of NMW for different age groups. Under 18s – £3.72, 18-20 – £5.03 and 21+ – £6.31 (£6.19 was last year’s figure).

    There is another band for Apprentices which is £2.68.

    I think you’re a bit out of your depth with this subject Mr Woolfe. Your last paragraph where you’re talking about reducing the minimum wage to 10p being unreasonable because no one would work for that shows it.

    For all kinds of reasons, there should be no NMW.

    • Duly noted about the different age bands, thank you.

      My comment on 10p/hour was merely to show that there is no point lowering it to a figure so low. If there was a demand from people to work for that amount, then I might reconsider that point. Is this really so unreasonable?

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