Minimum wages

With a few exceptions contemporary commentators on economic problems are advocating economic intervention. This unanimity does not necessarily mean that they approve of interventionistic measures by government or other coercive powers. Authors of economics books, essays, articles, and political platforms demand interventionistic measures before they are taken, but once they have been imposed no one likes them. Then everyone - usually even the authorities responsible for them - call them insufficient and unsatisfactory. Generally the demand then arises for the replacement of unsatisfactory interventions by other, more suitable measures. And once the new demands have been met, the same scenario begins all over again. The universal desire for the interventionist system is matched by the rejection of all concrete measures of the interventionist policy.

So wrote Ludwig von Mises in his 1929 book, A Critique of Interventionism. He could have been writing of the state of our political and academic debate today.

The Sunday Telegraph reports that "Gordon Brown is drawing up plans to vary the minimum wage region by region across Britain". The original intervention - a standard minimum wage for the whole country - has been judged by academic economists to be too blunt an instrument. Although the call is for more flexibility, the proposals are not simply to remove or reduce the minimum wage. Instead, they propose that we should tell each region the level of pay below which jobs should not be offered. That's an interesting definition of increased flexibility.

What the academics intend is that the minimum wage should be reduced in those parts of the country where a national-average minimum wage exceeds the level at which people might be willing to work and able to sustain a reasonable quality of life (though this is made literally and figuratively academic by the punitive nature of the means-tested withdrawal of nationally-harmonised benefits on the effective marginal rate of taxation). The objective is to allow some jobs to be created or legitimised, which currently cannot be afforded in compliance with the law.

Gordon, however, cannot reduce the minimum wage in those parts of the country, because the unions will not wear it. So it is suggested that, instead, he will raise the minimum wage in London and possibly the South-East. Because, from a socialist perspective, this is not about allowing people to find jobs, this is about micro-managing the economy to ensure that no one is getting more or less than they deserve.

The result, if implemented, will not be an increase in flexibility and the creation of jobs in areas of the country where costs-of-living are lower, but a reduction of flexibility and the destruction of jobs in areas of the country where costs-of-living are higher. Genius.

The Tories and LibDems, of course, now support the minimum wage too. I wonder what new interventions they will be drawing up to offer their refinements on this "improvement", and what all three of them will propose when these changes also fail to deliver the artificial boost to the incomes of poorer members of society that they all hoped they could compel by legislation, in contravention of the most basic laws of economics. It's so much better fiddling with this sort of superficial, bureaucratic, managerialist, economically-illiterate tinkering than actually doing something about the structural problems, most of which the politicians themselves have created, isn't it?