Warning on minimum wage

A minimum wage would "significantly reduce" employment, the Government is warned today, in a series of articles by economists. The articles, published in the journal of the Institute of Economic Affairs, point to evidence in other countries.

Professor Walter Oi, an American labour economist, writes: "A policy that can raise the wages of those at the bottom of the wage ladder with no job losses is remarkable. It rivals a perpetual motion machine or alchemy," he said.

The professor argued that fringe benefits, such as training, could be reduced by a minimum wage. "Minimum wage laws can raise cash wages, but the consequences are fewer jobs and a deterioration of the utilitarian value of the job package."

The Government is setting up a Low Pay Commission to take evidence from unions and employers, over the next year, on what level a minimum wage should be set.