The debate that followed this article on apprenticeships and youth unemployment was hijacked by the Anti-Minimum Wage Crew.
Reprising an argument he'd already put forward here and here, Tim Worstall argued that countries like Denmark and Sweden have lower unemployment rates, including amongst the young, because "[N]either have a national minimum wage".
Worstall is spot-on when he argues that: "[O]ne of the vile things about the UK's current taxation system is that it reaches so far down the income scale [and that] it's possible to be working part-time on the minimum wage and be paying income tax". But the problem there is the tax system, not the minimum wage.
Which is why Worstall is wrong when he writes that "there really is an unemployment effect" caused by the minimum wage, effectively echoing what the Conservatives (including a younger David Cameron) were saying when the Minimum Wage Act was implemented back in 1999: "it would send unemployment straight back up". It never happened.
The argument is flawed on so many levels that it's even difficult to know where to begin. Especially because the causes of unemployment are so complex, both politically, geographically and historically, that it's actually unfair to point at black and white causes and solutions.
Either way, for a libertarian to cling on to Denmark and Sweden as market models is quite peculiar. Redistribution there may not take place in the flimsy guise of a National Minimum Wage, but their top tax rates would cause a free marketeer a seizure. It's 58% in Denmark and 55% in Sweden.
The whole ratio behind the introduction of a National Minimum Wage in the UK was precisely to enable people to earn something closer to "a living", without affecting the overall tax structure.
Also, Denmark may not have a state-imposed National Minimum Wage, but that's because there is already one that was privately knocked out together by the Danish Trade Unions and the employers' organisation covering 81 to 90 per cent of the national workforce. Incidentally, it is so low that virtually all Danish workers are paid above the minimum rate anyway.
In any case, when most countries compare their economic variables with Scandinavia, they tend to come off worse. I don't believe unemployment in Denmark is lower than in the UK because of the minimum wage any more than I believe lower temperatures can explain Scandinavia's lower corruption levels.
Italy -with a population very similar to Britain- has never had a National Minimum Wage. Yet it's joblessness rates have consistently been higher than the UK since the NMW.
Take a look at this comparative table. At the end of 1997, Italy's rate stood at 12,2% vs 6,8% in the UK.
The rate went down in both countries throughout the Noughties. Italy reached its best moment in 2007-8 at 6.1%, its levels though still higher than the UK, where the joblessness rate remained consistently under 5 per cent between 2003 and 2006.
It's also worth noting that, in 2003, Italy adopted labour laws that are amongst the most "flexible" in Europe. While casualisation sky-rocketed and it became fantastically easy and cheap for employers to hire and fire, this did little to stem the massive downturn when it hit in 2008.
Again, Italy's unemployment went back up. As of March 2010, it stands at 8,6%. Though at their worst since the early Nineties, Britain's rates - currently 7,8% - are still lower than Italy's.
Britain has a mimimum wage, Italy doesn't. Would that be enough to explain the different performances if we were to follow Worstall's logical fallacy?
If that wasn't enough, we could look at other variables. Focusing on Britain alone, we can return to this table. Look at how high unemployment was in the pre-minimum wage days, through both the 1980s and the 1990s.
Or we can look at the United States, instead. Like Robert E. Prasch wrote in his In Defense of the Minimum Wage, "[B]etween 1981 and 1990, government policy allowed inflation to erode the value of the federally mandated minimum wage".
The neo-liberals in the Reagan and Bush Sr administration promised that a total freeze in the minimum wage would induce businesses to hire and provide experience to more unskilled workers. Compare the joblessness figures of 1979 (5,8%) with 1990 (5.6%). Like Prasch notes, "the structural reduction in unemployment simply failed to happen".
If anything (see this), US unemployment peaked in the 1980s and went down consistently throughout the 1990s, when the minimum wage was raised repeatedly for the first time since the 1970s.