Right of Reply: Ruth Lea

The head of policy at the Institute of Directors replies to a recent article by Diane Coyle

I READ Diane Coyle's article on the merits of the minimum wage with dismay. To use a phrase from a popular TV programme "I couldn't disagree with her more." There is no doubt that the extra costs and burdens that are being imposed on business by the minimum wage, the Working Time Directive, the Fairness at Work proposals and the employer administered Working Families Tax Credit will significantly damage businesses which elect to comply with the law.

Such increases in costs will effectively act as a tax on job retention and creation. To argue otherwise flies in the face of the elementary rules of supply and demand (unless Diane Coyle believes the demand curve for labour is inelastic). Indeed I seem to remember that the Chancellor of the Exchequer suggested that one person's pay rise will be another person's job loss! You can't buck the market. Leave markets to assign, in their wholly impersonal and amoral way, people to jobs at the "going rate" and let the tax-benefit system deal with issues of poverty.

Overseas companies are already questioning whether the UK is a good place to invest given the substantial increase in costs and regulatory burdens. Estimates by Business Strategies suggesting that the minimum wage will lead to 80,000 lost jobs look, if anything, on the light side.

Moreover, the groups of people which are affected by the minimum wage are the most vulnerable in the labour market. They include people in hotel and catering, the security business, the all-too-vulnerable textiles industry, residential homes, and cleaning. The minimum wage is a sledgehammer to crack a nut - but the nut will be missed as the really exploitative rogue employers will ignore it.