Sunday 12 April 2009

Arguments in favour of the National Minimum Wage

From this comment

7. Different taxes have different effects. NI [National Insurance] is a tax on employment and therefore deters the use of labour and encourages efficiency and automation. It doesn't put businesses in general out of business, it puts high-labour businesses out of business and encourages low-labour businesses (and the businesses that supply the equipment to reduce the labour, or, to put it another way, increase the productivity).

You could say much the same about the National Minimum Wage, which discourages low value added activities. That doesn't put "businesses in general out of business" it puts certain specific businesses out of business and adds to unemployment; pretty much like National Insurance.

Some may see this as A Good Thing, but quite why completely escapes me.

2 comments:

neil harding said...

mark - we need to get away from taxing 'good' things like employment and tax 'bad' things instead like pollution and underuse of land. The min wage exists because tge tax system is a mess. I don't kniw if you saw peter wilby's argument on this in the guarduan yesterday?

Mark Wadsworth said...

NH, agree on your first points, but not on the justification for the NMW.