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Letter: US lessons on the minimum wage

Sir: Hamish McRae's account (29 April) of the success of the American economy in creating 12 million new jobs without wage inflation surprisingly omitted two words crucial to the present debate - minimum wage.

He quotes evidence that most of these new jobs were created in small and medium-sized firms in the service industries, the very sector which in the UK has been most vociferous in its opposition to the minimum wage.

Opponents usually ignore the American evidence. Kenneth Clarke dismissed the American rate as very low. Here are the facts: the federal minimum wage is $4.75 an hour, which on 1 September will be increased to $5.15. People under 20 may be paid a minimum $4.25 an hour during the first 90 days of their initial employment. Employers may not dismiss any employee to hire someone at the youth rate. The Act also requires that employees be paid one and a half times their regular pay for all hours worked over 40 in a working week.

These are not low rates. The cost of living is lower. An hour's work in the US for $4.25 buys 11.78 litres of petrol, which in the UK would cost pounds 7.07; a can of Campbell's mushroom soup costs 35 cents there, but 53p here. A pool-side double room at the Beacharbour Resort, Miami Beach, costs $90.

These facts and Hamish McRae's analysis make nonsense of the claims that a minimum wage destroys jobs and pushes up labour costs. I take it he looks forward to its beneficent effect in the UK during the coming years.


London SE23