There’s no logic behind the workfare proposal
THE government has introduced a scheme that encourages people on the unemployment benefit to work at selected firms, such as Tesco. They are paid nothing but are alleged to benefit by gaining work experience.
This is not slave labour, as some have alleged. No one is forced to do this unpaid work, not even as a condition for receiving the dole. Nevertheless, the policy reveals the government’s moral confusion about labour policy.
It is illegal in Britain to work for less than £6 an hour. Most who favour a legislated minimum wage believe it benefits unskilled workers. Perhaps it does, but not by increasing their pay.
To see why, suppose you owned a little house for which no one was willing to pay more than £100,000. Now suppose the government imposed a minimum house price of £200,000. This would not help you sell your house for a higher price, since it would make it no more desirable. The law would effectively ban you from selling your house.
Similarly, a minimum wage does not make unskilled labour more valuable to employers. It simply bans people whose labour is worth less from working. If government ministers think this is a way of helping the unskilled, they must believe that it is better to be unemployed than to work for £5 an hour. Better to be on the dole than to be exploited.
But, then, how can we understand their new unpaid work scheme? You are exploited if you work for £5 but helped if you work for nothing? What principles can justify a policy of increasing the minimum wage and then creating a scheme designed to encourage people into working for no pay?
Despite ministers’ recent laments about cronyism, that is the effect of this policy. The government sets a minimum wage that creates unemployment and then arranges for some of the unemployed to work unpaid for favoured firms, with these workers’ subsistence funded by taxes on the rest of the population. Economically, this is an even better racket than slavery; slave owners had to cover the cost of their slaves’ food and lodging.
Nor is it only when someone is a ward of the state that the government suspends its objection to low-paid work. My friend Scott has a vegetable garden. He scratches away at it for about five hours a week and produces about £10 worth of vegetables. That is a rate of pay of £2 an hour, paid in vegetables. The government does not stop him. But if he preferred pubs to gardens, and worked in his local for five hours to receive £10, he would be breaking the law. What’s the relevant difference?
Similarly, I might hire someone to cook for me if I could pay him £4 an hour. But I am not allowed to. So I cook myself, thereby working for less than the minimum wage (no one would pay £6 an hour for my cooking). This legislative incentive for do-it-yourself is not only ethically arbitrary, it restricts the division of labour and, hence, economic growth.
If the government wants to help young and unskilled people gain work experience, and wants to promote growth, it should abolish the minimum wage. Alas, I fear it is too confused and too gutless.
Jamie Whyte is a senior fellow of the Cobden Centre.