National Minimum Wage hikes could prove "unsupportable," says IEA expert

Professor Len Shackleton, Editorial and Research Fellow at the Institute of Economic Affairs, said:

“The decision to raise the National Living Wage by an unprecedented 6.2%, and other minimum wages by significant amounts, always risked scuppering employment growth, particularly in poorer regions where arbitrary wage hikes could offset the government’s plans to boost investment and jobs.

“As we are now facing a Covid19-induced economic downturn, the case for these increases is greatly weakened; the cost of these changes could be unsupportable, both to employers and the taxpayer.

“The government would have been sensible to postpone or even cancel this increase. There is now a real risk businesses will be forced to lay off more workers than necessary.

“The Chancellor would do well to remember in future the potentially damaging consequences of continuing arbitrary increases to minimum wages, something many economists have warned against even in much more favourable labour market conditions."