Minimum wage rises

Britain’s low-paid army will get a rise whoever wins the election. Theresa May is committed to increase the minimum wage to £9 an hour by 2020. Jeremy Corbyn has trumped that by saying all workers, not just those over 25, should be on £10 an hour by that date.

There was not always such cross-party consensus. The Conservatives fought hard against the minimum wage when it was first introduced by Tony Blair in 1998, arguing that state interference with the workings of the labour market would cost jobs. That claim proved to be plain wrong. What was true of burger flippers in New Jersey was also true of burger flippers in Manchester. Unemployment fell in the years after the minimum wage was introduced and that trend has continued since the recession, with the jobless rate currently below 5 per cent, despite above-inflation increases for the lowest earners. Put simply, the minimum wage has boosted spending power and the increased demand has led to more jobs being created.

But it seems improbable that a 62 per cent increase in the minimum wage for 18-20 year olds – Labour’s plan – would not cost jobs. Both Conservatives and Labour need to tread warily. They would do well not to fixate about specific targets. A minimum wage of £9 an hour – let alone £10 an hour – looks ambitious when average earnings are rising by barely 2 per cent a year.