Surveying the Budget, one can find all sorts of things to moan about. I, for example, rather like the idea of a countryside of sturdy, independent yeomen, so a system of inheritance taxation that confiscates them all back into peasantry doesn’t seem attractive. The idea of taxing vaping so that everyone moves back to dying of cancer sticks doesn’t sound like a great idea either. But the one notion that I think is truly vile is this decision to entirely bugger up the employment prospects of the young. 

This is not, to my neoliberal mind, a sensible purpose of public policy. Yet that’s what they are doing.

As background, whatever the costs we impose upon the labour market, they are going to bite most deeply upon the marginal elements in that labour market. If this isn’t immediately obvious then allow me to assure you that it is so. Whatever we do about workers’ rights, wages, taxes upon employment et cetera, it’s going to be the people on the cusp of working or not working who will be hardest hit. A change in the minimum wage won’t change the employment prospects of a banker. That nurse it takes 3 years to train won’t be affected by whether they can be fired — or not — in their first year. Adding a few hundred quid a year to the cost of employing a teacher is, well, really neither here nor there in terms of their employment prospects. 

But to the 16 or 18-year-old, untried and never employed as yet, any such changes in the costs of employing them are going to matter. Either the base costs of employing them, or shrinking the gap between their costs and those of already proven workers, that’s where the bite will be. 

This is, of course, why ever since we’ve had a minimum wage, that for 16 to 18, and then again for 18 to 20, has been lower than the general adult minimum wage. We know that those just entering the world of work are the hardest hit by a price for their labour that is “too high”. To get employers to take the chance on the untried, let alone the untrained, there has to be a price difference. 

So, what’s just happened in the Budget? Both those youth minimums are rising substantially. The aim is to get them up to the full adult minimum wage over time too. That, in itself, is supposed to settle at about two thirds of the median wage for the country as a whole. Now, I think that’s a bad idea in itself (and there’s good backing for my suspicion too), that adult minimum. But insisting that the young also face that same hurdle? We’re getting into vile policy territory here, not just bad.

For an 18-20 year old, the cost of employing them has just gone up by £2,500 a year. Well, that’s the cost of their wage rise that is. There’s also dropping the entry level for employers’ national insurance to £5,000 at the new rate of 15 per cent, which is an extra £600 a year. So, we’re raising the cost of employing those just starting out (slightly different numbers, but comparable, for 16-18) by £3,000 a year and change. Given what the minimum wage is, this is also 15% and more of the cost of employing them. 

Oh, and don’t forget, they also get workers’ rights from day one of employment. Trying someone out for a few months — a probationary period — doesn’t work the same way any longer. 

This clearly raises the costs of allowing someone to enter the workforce. Worse, it raises the costs of enabling someone to do so as compared to employing someone already tested and found to be worth employing. That is, all this is going to bite on the marginal worker — the one who may or may not be given the chance to go to work and prove themselves. 

No, this isn’t just some ethereal musing. Because we know what a labour market with those sorts of constraints looks like. Strict labour “protections” plus a high, compared to local wage rate, minimum wage is what Latin Europe largely does. The outcome there isn’t good. It isn’t good at all. There is a 26 per cent youth unemployment rate in Spain, as compared to 14 per cent in the UK. There is only — only — 21 per cent in Portugal, true, but that’s after getting on for 4 per cent of the entire population has left the country — nearly all of them young — in order to gain employment.

… that they’ve combined three measures here, at the same time, makes me assume they just hate young people and their employment prospects

Substantially raising the cost of employing those just coming out of school, compared to the cost of employing those already out and employed for a bit, substantially lowers the probability of those just coming out of school gaining a job. This then carries on forever — because if you can’t gain that first job, you never do get on that ladder of having been tried and found to be worth employing. As the classic cartoon has it — removing the lower rungs of the ladder into the job market doesn’t aid those starting out.

Within policy circles, this is all well known. It’s enough of the conventional — even trite — opinion that The Economist has run articles on it for Heaven’s sake. So, why have they done it? 

It’s possible that they are just remarkably ill-informed, of course — maybe they’re just not very bright. But as with James Bond and happenstance, coincidence and enemy action, that they’ve combined three measures here, at the same time, makes me assume they just hate young people and their employment prospects.

What joy to be ruled by such, eh?