It's not clear cut, mainly due to a lack of useful data. I don't know much about the labor market in the UK (your link only discusses employment/unemployment in 2007, not the effects of minimum wage in 1998), but I'll discuss the US.
In the US, only 1-2% of workers make minimum wage. If a minimum wage law drove 50% of them out of work over 2 years, it would increase unemployment by only 0.25-0.5%/year. And 50% is a huge; in reality, far fewer than 50% of minimum wage workers will be driven out of the market.
The effects on minimum wage also don't last much beyond a few years, since the minimum wage is not indexed to market wage for low skill jobs (or even to inflation, which is not the same thing). So in a few years, the minimum wage drops below market wage and becomes irrelevant.
This effect is sped up by companies raising prices (since costs rise across the industry, this doesn't cause a loss of market share). This drives up prices, causing inflation, which again reduces the effect of minimum wage.
Minimum wage is mainly just a a propaganda tool for politicians. That's why it's not indexed to inflation: if it were, they couldn't get on TV and say "I care about America's poorest workers" every few years. That's also why minimum wage is kept low; if they pushed it above market wage for the bottom 1-2%, the harmful effects might be large enough to be visible (even if they are questionable, this is not a risk a politician wants to take).
Well said. +1. I think Russ's point was that if minimum wage actually was raised high enough by the well-meaners that they thought it would institute social change, it would backfire in a most comical and epic way. Imagine if the minimum wage were set to 100/hour tomorrow...
Instead, politicians just wait till election season then realign the letter of the law to more or less match the current market value and then proclaim what a friend to the poor they've been from the doorway of their gulfstream.
In the US, only 1-2% of workers make minimum wage. If a minimum wage law drove 50% of them out of work over 2 years, it would increase unemployment by only 0.25-0.5%/year. And 50% is a huge; in reality, far fewer than 50% of minimum wage workers will be driven out of the market.
The effects on minimum wage also don't last much beyond a few years, since the minimum wage is not indexed to market wage for low skill jobs (or even to inflation, which is not the same thing). So in a few years, the minimum wage drops below market wage and becomes irrelevant.
This effect is sped up by companies raising prices (since costs rise across the industry, this doesn't cause a loss of market share). This drives up prices, causing inflation, which again reduces the effect of minimum wage.
Minimum wage is mainly just a a propaganda tool for politicians. That's why it's not indexed to inflation: if it were, they couldn't get on TV and say "I care about America's poorest workers" every few years. That's also why minimum wage is kept low; if they pushed it above market wage for the bottom 1-2%, the harmful effects might be large enough to be visible (even if they are questionable, this is not a risk a politician wants to take).