On Unite's demand for a £1.50 rise in the minimum wage
Howard Reed has done this particular piece of pencil sucking research for Unite to back up their demand for a rise in the minimum wage of £1.50 an hour. They're very proud of the fact that this would increase the amount of tax paid. Which doesn't really strike us as being all that good an idea really. Hoovering more money out of the wallets of the lowly paid never does sound like a good idea to us but we assume that things are seen differently over in unionland. But in the report they also say this about the macroeconomic effects:
A £1.50 per hour increase in the National Minimum Wage has three potential multiplier impacts on UK GDP: • The wages impact: the increase in net incomes arising from the increase in gross wages should lead to increased consumer demand which has a positive multiplier impact on GDP. • The profits impact: the reduction in net incomes arising from a decrease in profits may lead to reduced consumer demand which would have a negative multiplier impact on GDP. • The public finances impact: the increase in income tax, expenditure tax and NICs receipts and the reduction in benefit and tax credit spending leads to an improvement in the public finances even after taking into account increases in the public sector wage bill and reductions in corporation tax revenue. This means that government spending does not need to be cut as badly as current plans suggest. If the improvement in the public finances is matched by an increase in government departmental and investment spending – so that the overall government fiscal position is unchanged – then there should be a positive multiplier impact on GDP.
Reed also looks at the number of jobs that will be lost from that rise in the minimum wage and, hey presto, finds that more will be created than lost. He manages this by taking the lowest estimate of unemployment to be created he can find and the highest one for the number of jobs to be created available.
Hmm. Think we'll file this report in the policy based evidence making file, that round one under the desk, shall we?