On April 1st, the UK minimum wage increased to £8.21 ($10.46) giving it one of the highest minimum wages, in real terms as well as a proportion of the median full-time salary, in the world. Known as the National Living Wage, the top rate is paid to employees in the UK aged over 25, with a sliding scale from the ages of 16-25.
This latest minimum wage increase means that the National Living Wage has now risen by more than half, including the effects of inflation since it was introduced in 1999. Correspondingly, the average wage has only increased by 15% over the same 20-year period. However, this does not mean that people on the UK minimum wage have been having a better time of it than other employees, rather, the gap has been reduced between the poorest earners in society and their peers.
More people being affected
When the UK minimum wage was launched in 1999, there were only 700,000 people who were affected by it, however, this has risen to 1.6 million today. The employees who benefit from the wage are generally service sector workers, such as kitchen assistants, cleaners and hairdressers, who may not be able to demand better pay on their own due to insecure working conditions, high competition or lack of awareness of their rights. Almost 90% of those who benefitted from the most recent minimum wage increase were in the private sector.
There is still a long way to go however, in reaching the poorest members of society in Britain, as only 20% of those on the lowest wages live in the poorest households, i.e. the wage earner/s in the poorest households may be on slightly more than the minimum wage, but due to other factors, such as rent or childcare costs, suffer from a greater level of poverty overall.
Minimum wage increase doesn’t harm employment
Despite what many of its critics would wish us to believe, minimum wages in general have little effect on overall employment levels. This can be readily seen in the UK’s unemployment figures reaching record lows, despite it having one of the highest minimum wage levels in the world. One reason for this is the relatively low proportion of the workforce that a minimum wage actually affects, the vast majority of employees earn much more. Another reason is that companies still make enough of a return on the employee’s productivity that it is worth their while to keep employing them.
The major risks posed by a minimum wage level that’s too high are when it becomes too expensive for companies to hire, though global experience has yet to find that a problem. In fact, researchers at the University of Berkeley have found that minimum wage increases simply increase pay, without having a negative effect on the number of jobs.
With the UK’s booming economy, it seems that steady increases in the national minimum wage are, if anything, beneficial overall. To see what other benefits you can deliver to your team, try introducing Planview AdaptiveWork, it’s range of project management features make work faster, project visibility clearer and communication easier.