The minimum wage is a tax on jobs

The Government should be working to reduce barriers to job creation, not helping to erect them.

The Chancellor's call to increase the minimum wage, while politically astute, is still a tax on jobs.

Yesterday George Osborne expressed his desire to see an inflation busting rise in the minimum wage.

He proclaimed that the rise was just compensation for low-income workers who had suffered disproportionately as a result of the financial crisis.

The move was heralded by commentators as a politically savvy manoeuvre by the Chancellor to outflank Red Ed on the cost of living debate.

Delighted at any opportunity to spend other people's money, the Lib-Dems, unsurprisingly, are on board (although Vince, clearly miffed that George has taken the credit, couldn't resist pointing out he'd called for the rise months ago).

The reality, however, is that while such a move is undoubtedly 'good politics' and may well bring some welcome relief to many low-income workers, is likely to be to the detriment of those currently seeking work, particularly the young.

Young people have been clobbered by the economic crisis. Recent figures show the jobless rate among the under-25s is close to four times that of the adult rate. Nearly a million young people are unemployed and roughly a third of those have been looking for more than a year. Talk of a "jobless recovery" for the young is commonplace in the media.

Studies of previous recessions have shown that a year of youth unemployment reduces earnings ten years later by about 6% and means that individuals spend an extra month unemployed every year up to their mid-30s.

The business community is opposed to the wage rise. The British Chamber of Commerce, has said: "Although it is clear there is an increased disparity between the highest and lowest earners, arbitrarily raising the floor isn't necessarily the way to do it."

The Institute of Directors has called for any rise in the minimum wage to be offset by reductions in National Insurance contributions made by employers. It won't be.

Politicians would do well to look to our industrious German counterparts. Arguably the most successful European economy and a country with an income inequality ratio significantly more favourable than ours, Germany was doing perfectly well without a statutory minimum wage until last November, when Angela Merkel was forced to cave in to the left and announce its introduction.

At a time when youth unemployment is so high, the Government should be working to reduce barriers to job creation, not helping to erect them.