The hue and cry has gone up on both sides of the Atlantic among the righteous: raise the minimum wage! This ideological chant is considered an answer to poverty, inequality and even the route to productivity growth. But it is none of them: it is populist politics and bad economics.
If the price of labour rises, demand is likely to fall. That means fewer jobs. In the 21 EU countries with a minimum wage, unemployment is on average almost 50 per cent higher than in the seven countries without such legislation. Obliging business to pay staff more does not increase economic activity; it is merely redistribution but with added collateral damage.
Fantasists and fanatics believe that across-the-board pay increases suddenly improve staff productivity. Sadly it is not the case – employees are doing the same job, just being paid more. Minimum wage increases are not performance-related – so why would anyone work harder if given a fixed, statutory increase?