Minimum Wage’s Mobility Roadblock


Is the minimum wage driving black youth unemployment and contributing to the knife crime epidemic? 

The UK economy shrank 20.4 percent in the second quarter of 2020, its largest fall on record, making tragically plausible the claims that we could get mass unemployment on a scale unseen since the Great Depression of the 1930s. I fear immense hardship is hurtling down the road towards us and I know one obstacle to our recovery no one will want to talk about: minimum wages. They raise the cost of living and crush jobs in the cradle.

I also believe, even though I can’t prove it yet, that in the UK they already contribute, and have for some years, to a plague far more worrisome than the coronavirus, the knife crime epidemic among young black men (which, of course, people want to talk about even less than the effects of the government fixing prices in the market).

The many years I worked in both the hospitality and construction industries taught me that minimum wages are bad for virtually everybody concerned. The sole exceptions are politicians who need to buy a few extra votes or mollify the left ahead of an election, and the chattering classes, for whom the minimum wage is a sacred cow.

Minimum wages are especially damaging to the prospects of the jobseeker with few skills or little or no job experience, who sets out to find employment only to find that the government has fixed the price of his or her labour greater than what employers will pay for it. For young people, those most likely to find themselves in this position, the National Minimum Wage is £4.55 an hour for under 18 year olds, £6.45 for 18-20 year olds and £8.20 for those aged 21-24. (Over-25s get the highest rate – called the National Living Wage – now £8.72 an hour.)

Put yourself in the boots of a builder who has before him two candidates for the position of labourer; one has worked on construction sites before and has references to prove it, the other is inexperienced and, of course, has no references. Both, thanks to the National Minimum Wage, are available at the same price.

The builder only needs one of the two young men before him, so he must choose. He is also expecting a delivery of sand any minute, so he must be quick about it. And so he is.

Believers in the minimum wage will deny it until they are blue in the face, but in almost all events like this, where an inexperienced job seeker must compete with a proven alternative at the same price, the applicant with references will triumph.

Without the minimum wage law (which HMRC enforces) the inexperienced applicant could have competed on price, perhaps offering to work for half the market rate for a week while he showed himself capable of doing the job.

As things stand, however, the inflated price of his labour (inflated not by him but by the government) is more than the builder will pay for someone with no skills and no track record in the workplace.

If you are also from a stigmatised group, such as young black men, it can be a practically insurmountable barrier to employment – and a one-way ticket to life on benefits and everything that comes with it.

Even in countries with strong welfare safety nets, that means relatively lower living standards. But there is ample evidence that it can mean far worse than that.

Though there is some debate about whether the relationship is causal, there is a strong correlation between unemployment and mortality. A 2015 study into the effects of the financial crash by the University of Zurich, for example, linked one in five suicides a year worldwide to unemployment. I shudder to think of what similar studies will find in the years to come.

Perhaps unsurprisingly, there is also a strong correlation between unemployment and crime. A study for the Mayor of London’s office last year showed that three quarters of the most violent boroughs in the capital are also in the top ten poorest.

It is in these areas that violent crime occurs most often, including knife crime.

The number of knife crimes in England and Wales has risen by a further 6 percent to 46,265 for the year to March and is now an astonishing 51 percent higher than when such records began in 2010.

Young black men are heavily over-represented among the victims and perpetrators of these crimes, especially in London. Discussions about it are predictable. The chattering classes blame ‘austerity’, while conservatives tend to emphasise absent fathers.

But could it have something to do with the fact that while the government keeps raising the price of their labour, the unemployment rate for young black men in our country’s capital now runs to a staggering 42 percent, according to the Annual Population Survey? It is 12.7 percent for young people of both sexes nationwide.

And is it conceivable that rather than help the most deprived members of society, the Minimum Wage instead locks many of them out of the job market and the opportunity to build more secure futures?

Before becoming a journalist Ronan Maher worked in construction and hospitality for fifteen years. He still enjoys building, especially dry stone walls. But more than anything he loves to read and write and is working on a book on the first half of 2020. Follow him on Twitter at @MaherRonan