It takes a peculiar kind of logic to deduce that the reason for high unemployment among under-18s is that young workers and apprentices are pricing themselves out of a job.

But that is the implication of the Institute of Economic Affairs (IEA) report that calls for abolition of the national minimum wage for apprentices and workers aged 16 and 17.

For the record, the legal hourly minimum that these workers should be paid is £3.79 for under-18s and £2.73 for apprentices.

The Minimum Wage: silver bullet or poisoned chalice? Report declares that 15 years of minimum wage legislation has failed to reduce poverty or youth unemployment, but the answer is not to abolish this social reform.

It has proved invaluable in increasing the income of the worst-off workers, especially women, and has boosted demand in the economy because the low-paid tend to spend all their income rather than save or invest, as better-off sections may do.

The minimum wage's basic weakness is that it was set too low in the first place and it has failed to keep pace with either inflation or average incomes.

High youth unemployment is not caused by excessive labour costs, as any dispassionate examination of the pathetic statutory hourly pay level would conclude.

It is caused by a combination of factors, including the tendency of senior workers to work well into old age because of the inadequate level of pensions.

The main problem, however, is the effective investment strike by big business in Britain, where major companies are sitting on cash reserves of hundreds of billions of pounds.

The IEA ignores this problem, blaming payment of the national minimum wage to teenage workers in an era of "zero-hours contracts and unpaid internships, choosier employers and increased black market employment."

The report's reference to black market employment underlines the utter failure of successive governments to police minimum wage legislation.

TUC general secretary Frances O'Grady has welcomed government proposals to quadruple the current £5,000 fine for paying less than the legal minimum to £20,000.

But, as welcome as this measure may be, it will be ineffective if the government doesn't make funds available to HM Revenue & Customs to investigate and bring these ruthless exploiters to justice.

The signs are not good. Despite the efficiency of HMRC staff in paying for their employment costs many times over in rooting out non-payment of VAT, corporation tax and higher rates of income tax, their numbers are being slashed just as health and safety inspectors have been axed despite the unacceptable level of avoidable accidents at work.

Government protestations that it will crack down on big business and the rich for not meeting their obligations pale into insignificance in comparison with the real drive to hammer poor benefit claimants.

It is an obvious class question, where Tory and Liberal Democrat ministers are happy to subsidise firms that pay starvation wages through working tax credits and other in-work benefits because they share similar backgrounds and outlooks as employers.

Their skinflint attitudes encourage right-wing think tanks such as IEA to push even further to reduce supposed financial burdens on employers.

Far from truncating the minimum wage, it should be replaced by the national living wage, currently £7.65 an hour outside London and £8.80 in the capital.

This would give a real fillip to underpaid workers and boost the economy by stimulating demand and reducing benefit costs.