Last week our Regional Outreach Officer, Kyalo Burt-Fulcher, appeared on Sky News to make the case for a living wage.  Kyalo argues that, although the new National Living Wage is a positive step, it does not go nearly far enough. He was up against the Adam Smith Institute's Sam Bowman; as you'll see, things get quite tasty towards the end of the interview.

As a follow-up, we asked Kyalo to give some reflections on the debate and on the issue of the National Living Wage itself. Here’s what he said:

Any increase to the minimum wage of £6.70 per hour is a welcome step, given that full time jobs often do not pay people enough to live on. However, the National Living Wage (NWL) so far only constitutes a 50p increase, whereas the Living Wage Foundation calculates an actual living wage (i.e. the amount someone needs to live on) to be £8.25 per hour*, and £9.40 in London. This is because their calculation is based on the cost of living, while the Government’s one is arbitrary and based on getting positive headlines.

Worse, the NLW will not even apply to under 25s. People who are old enough to buy alcohol, get married, and fight on the front line for this country; and have been so for up to seven years! This is the latest in a long line of policies which suggest young people are the least of the Government’s concerns: tuition fees increased, EMA scrapped, housing benefit restricted etc. Meanwhile, pensioner benefits remain completely intact, even for top rate taxpayers.

Of course, these are arguments against the Government’s policy on the grounds that it does not go nearly far enough. However, my co-interviewee, Sam Bowman, does not defend the Government. Instead he takes the laissez-faire view that there should be no increase to the minimum wage at all; citing over 100 studies that apparently show that it will cause unemployment.

The only problem is that they don’t, as he admits to begin with, but then seems to forget over the course of the debate. The fact is that the effects on unemployment will depend on the level at which a minimum wage is set, and the economy it is set within. It is therefore unsurprising that the studies produce a mixed picture; in some cases imposing a minimum wage appears to increases unemployment, in others it has no noticeable impact.

As such, we don’t really know how increasing the minimum wage will affect UK unemployment. The figure repeatedly quoted in the debate was the OBR’s central estimate that by 2020 the NLW would increase the numbers of unemployed by 60,000. However, the OBR’s report (p.206) also notes that the same calculation would produce an estimate anywhere between 20,000 and 110,000, with only a small change to their ‘elasticity of demand’ assumption. When you also factor in the uncertainties around their other assumptions (which the report describes as ‘significant’) it becomes clear that these projections are highly spurious. Indeed, there are even reasons to believe increasing the minimum wage might reduce unemployment. Poorer people will be able to spend more money, thus stimulating economic growth.

Ultimately die hard free marketeers almost always argue against the introduction of any protection for workers (including having a minimum wage at all) on the grounds that this will hamper businesses and increase unemployment. This is transparently incorrect. We live in a time of both near record employment and more comprehensive regulation than ever. If we had listened to Thatcherites and their predecessors, workers would have literally no protection against exploitation but I doubt there’d be any significant difference to unemployment levels. Of all the things that affect unemployment, regulations on business is one of the least relevant; yet I don’t expect to hear the Adam Smith Institute calling for, say, an increase to adult education spending.

So that is the libertarian case; what do we weigh against it? A significant raise for nearly 3 million of our country’s lowest paid workers, and potential rises for around 3 million more on the second rung of pay scales. And remember, these are workers who currently do not earn enough to have what the British people consider a minimum standard of living. Even if the OBR’s guestimate is correct, for every job that might not be created, there are between 50 and 100 of the poorest workers who will definitely get a raise. You can make your own judgement, but I know which side I’m on.

*Of course, the NLW is intended to rise to £9.35 per hour by 2020. Unfortunately the actual living wage is projected to be £10.30 by this point.

Agree? Disagree? Like to give Kyalo a piece of your mind? If so, you can tweet him at @KyaloBF