Be wary of the substitution effects of the minimum wage

Ryan Bourne appears on BBC Radio Gloucestershire

Ryan Bourne, IEA Head of Public Policy, discussed possible changes to the minimum wage on BBC Radio Gloucestershire. This is in relation to comments by Professor Sir George Bain who stated that the current system has 'run its course' and expressed the need for a flexible minimum wage rate applying for different industries. Ryan expressed that this suggestion was either 'trivial or wrong'. This is because the proposals suggested may well be ignored by industry, as within its current form it was advisory, or would lead to state intrusion categorising what certain companies can and cannot pay.

Secondly, Ryan was concerned about a potential rise in the minimum wage, expressing what impact that would have on jobs, in both employment opportunities and hours worked. He argued that the more you push employers by forcing them to offer higher wages, the more likely you will create a substitution effect where low skilled jobs will be replaced by automation. 

You can listen to the full programme here. Ryan's segment begins at 2:06:07.

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