Friday, 10 May 2013

The UK minimum wage - flying at half mast ...

As previously reported on this blog, the UK minimum wage is being cut in real terms this October, and would be 7% higher today if it had increased in line with inflation over the past 5 years.

The infographic below shows just how much the UK minimum wage needs to catch up not only with inflation, but with rates in many other comparable countries.

(We're reliably informed that if the national minimum wage (NMW) had increased at the rate of that for FTSE100 Chief Executives since 1998, it would today stand at more than £19 per hour - equivalent to a full-time salary of £39,000 a year!)


A recently published infographic by the PCS union* shows that the UK NMW lags behind comparative rates in many other nations (though the UK edges the US on 32%).

The graphic also mentions that if our minimum wage was equivalent to that in France, low paid UK workers would be earning an extra £1.95 per hour - equivalent to nearly £4,000 extra a year. (If it rose to New Zealand levels, our NMW would be £9.55 per hour - equivalent to nearly £19,000 a year for full-time work).

For the national minimum wage to reach the UK living wage of £7.45 per hour would mean the NMW being equivalent of 42% of average earnings - the same rate as in Portugal, and just below that in Australia.

It's a commonly made argument that raising the minimum wage would increase unemployment. Indeed that same argument was made the NMW was first introduced. Study after study (including this one from the US) shows that not to be the case - and there are even Tories calling for an increase in the minimum wage.


It's quite clear that the UK's low wage economy is having a drag on demand (one that loosening credit doesn't solve). Indeed, a PCS report published earlier this year - Britain needs a pay rise - showed that the real value of wages has fallen by 7%, there has been a real terms drop in consumer demand of 5% over the same period.

And the misery doesn't end there for low paid UK workers - who are also facing a real terms cut in a range of in-work benefits, including working tax credit and child tax credit - while child benefit is frozen for the third consecutive year.

If you want an economic recovery, you need more £s in people's pockets. If you want more £s in people's pockets, you have to either legislate for a higher minimum wage (as many other nations have done) or restore some trade union rights, so that workers have greater bargaining power to win better pay.

*PCS has a great series of infographics which you can see via the PCS Facebook page

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