Coronavirus has brought with it a wave of economic ruin: rising unemployment, a contracting economy, and a volatile stock exchange. With the government deficit projected to reach record-breaking levels by the end of the year, many people have been looking towards the government for help - stock markets rise at the news of government intervention, and the general consensus is that the government is the only way out. But a growing movement is calling for the complete opposite: a reduction in government control. They say that recessions are caused by government intervention, not solved by them.
As of April 2020, the national minimum wage for those aged 25 and over (i.e. the vast majority of the workforce) stood at £8.72 per hour. Whilst seemingly insignificant and often overlooked, this number is a rising cause of controversy among libertarians, many of whom see this as a complete infringement on the free market’s right to determine prices through the basic laws of supply and demand.
Libertarians argue that the minimum wage artificially inflates the price of labour. Basic economic theory and the law of demand state that higher prices result in lower consumption, and they say that this is exactly what is happening right now. In a recession, firms value labour less than they otherwise would, as supply far outstrips demand. Therefore, by artificially overpricing labour, firms can no longer afford to pay that price, leading to more unemployment - something the UK is currently no stranger to.
Another argument is that the minimum wage also disenfranchises less skilled applicants. With more applicants than jobs, firms have the privilege of cherry-picking only the very best applicants, disproportionally harming the younger and less experienced applicants who are not valued at £8.72 per hour. Libertarians say that with the abolition of the minimum wage, firms would naturally be able to compete to pay applicants at their market rate: say £4 per hour. They’d argue that whilst not ideal, some form of payment is certainly better than no form of payment.
A further argument is that the minimum wage reduces production. Firms being unable to employ as many people as they otherwise would mean that they output less, passing on these extra costs to the consumer. Lower prices are something we can all rally around, and a libertarian blames the minimum wage for the high prices of expensive goods and services.
However, the minimum wage is still a very popular government policy. Supporters of the minimum wage say that it increases the income of the low paid and incentivises firms to invest in productivity. Conversely, most libertarians would disagree, saying that the damage caused by it is far greater than the benefits: countries with no minimum wages, like Sweden, Norway, Finland and Denmark, seem to have weathered this economic crisis better than the rest of Europe.
Either way, it appears as though the minimum wage is here to stay. The government currently has no plans to abolish the minimum wage, and only time will tell whether the UK emerges from this economic downturn as a global victor or loser.
