Minimum wage increase pros and cons

[Airconfan]

I hadn’t really considered it before but a few opinions on raising minimum wage got me thinking. If you work 40hrs minimum wage is now over £27k a year.

• Raising minimum wage but not raising the tax brackets works in favour for the government.
• Any jobs just above minimum wage are now going to be squeezed, unless there is career progression possibility, why would you bother earning £28k in a more stressful job?
• for businesses does this cause more issues for starting / entrance level jobs?

Other options people have mentioned is the government should tackle the cost of living instead as you can’t keep increasing minimum wage. Not sure how they tackle that though and what the options are?

It’s a really tough one because the lower minimum wage is kept artificially low due to the huge universal credit top ups families receive, but now that minimum wage is jumping to 28k there will still be hundreds of thousands of people in the 40-50k bracket not experiencing a jump but who have degrees and 10/15 years experience behind them. These jobs will carry a lot more stress and often additional unpaid hours expected and it does start to look like working stacking shelves for nearly 30k would be the easier option for not a huge take home difference!

its a shameless ploy to buy votes when in fact it is just fiddling at the edges whilst Rome burns.

So a 28k salary gives you just short of 2k a month, by contrast you go to uni, get saddled with debt, work your way to a 45k salary, have student finance reductions and pension reductions because you’re a sensible professional who should save into it and you’re about £700 a month better off than the 21 year old on a low skill minimum wage job.
It’s hard to view that as aspirational.
Particularly if the minimum wage worker has kids they might receive housing benefit and UC on top, making the gap even smaller between their purchasing power.

UK new minimum wage: £27,456 per year.

Higher-rate tax bracket: £50,270.

1.8x difference.

In 1997 there was a 5x difference.

We are killing the aspirational middle class IMO - the tax burden on those earning above average (and increasingly above the minimum wage) is too large.

Care homes will be hammered again, and therefore the residents’ quality of life. Some care homes for people of working age, are only funded by Local Authorities and ICBs. They won’t increase what they pay in fees, to fund another rise in the NMW, especially on top of Rachel Reeves budget last year. Care homes will make cuts to provisions for the residents, like in lighting, heating, food and activities.

DD1, who lives in a care home, was crying to us regularly last winter, that she was cold, particularly at night! I had to buy her a much thicker duvet, to keep her warm in bed at night. The corridor in her house was dark late afternoons, because they didn’t put the lighting on. I thought it was dangerous, as the corridor leads to a half flight of stairs and people with learning disabilities can have faulty visual perception! (It’s confirmed in their accounts, how much they have saved on energy)

As for the middle classes, the ultra rich have stripped the wealth away from the working class, now they are doing it to the middle class. We are returning to a modern day equivalent of feudalism with the majority of the population, as wage slaves. Elon Musk is supposed to be the first trillionaire. Where did his money come from - the rest of us!

It’s a tough circle. I produce an item that most people put in their supermarket baskets once a week. The supermarkets know our costs down to a penny. We are on a contract where if our feed, wages and electric go up (or down) the price we are paid goes up (or down). A guaranteed small margin if you will.

They know how many hours it takes to produce an item. Every single one is costed at NMw. Nothing for management, a Christmas bonus, the house that se rio staff get for working weekends, Christmas Day and night call outs.

When the NMw goes up it put the cost of everything you buy up.

Then on top of that as a country we don’t like paying more for things so we import it from countries where they don’t have the rules and regs we do and oh hello Salmonella outbreak

@LathkillDale that is horrendous

Also - with the increased cost of NMW, our local high street shops all just appear to be hiring less and less people.

Make it too expensive to employ people, and they won’t.

But without the Government forcing a wage increase those on low wages, even working back breaking jobs, won’t be able to afford a new winter coat say if they need one.

Plus universal credit drops as you earn more money so it’s a subtle shift from benefits to employers who should pay for the jobs they want doing enough money so an adult can have a basic standard of living.

No decisions about the UK economy are easy at the moment. We are a stagnant economy. With high personal costs. But not supporting the lowest paid workers is not the answer.

I get the argument about minimum wage but it really isn't 28k when you take out tax and pension contributions(which are definitely needed). It still isn't enough to afford to live on with the cost of housing being so crazy. So people need top up benefits to help them pay their rent.

On the other hand employers aren't hiring due to the rise in Minimum wage. People moan about the benefits bill but also think minimum wage shouldn't go up. So what is the solution?

Can I point out that you're talking about the over 21 year old's wage.

For 18-20 year olds it is £22,568 (40HRS)

For under 18s or apprentices it is £16,640 (40hrs)

Also 40hrs is unlikely - many contracts are for much shorter base hours with 'full flexibility (for the employer only)

Obviously it’s over 21 though, comparing the wage of a 17 year old apprentice would be ridiculous.

@LathkillDale There was an article in the BBC about how big American care firms are buying large stakes in the UK care market - seeing it as a profitable area to invest in.

I can't imagine this will lead to anything other than more cuts to the service provided whilst more money is pushed to shareholders and the UK taxpayer is fleeced for poor care provision.

Why would it be ridiculous? Work is work.

Once upon a time it would have been ridiculous to compare women's work with men's.

Small businesses are going to get absolutely smashed here.
My last place was a very small business, only 4 of us. I was a manager on £35k which also came with lots of major responsibility (H&S responsibilities, financial etc), the cleaner was paid the living wage at the time which I think was £12ph (min wage was less than £10). For a company like that, the increase in nmw would push my salary up too and there's no way they could have afforded that.
I'm not saying that nmw shouldn't increase, but it's jumped so much recently that people who are earning £30-£35k aren't going to see much point in the extra stress of their jobs and look at min wage jobs.
Many businesses can't afford to increase all the salaries this way

£27,456 after tax = £1,849pcm

£50,270 after tax and student loan = £2,985pcm

Not an enormous gap between minimum income and ‘the rich’.

Raising minimum wage increases the cost of goods and services, meaning that actually it makes very little difference to cost of living. As the government don’t pay for it, businesses do, they reduce staff numbers or hours to keep their business profitable, so less jobs/hours for staff. What the government should be doing is increasing the personal tax allowance (the money you can earn before you start paying tax). This increases the amount of money in people’s pockets and doesn’t cost businesses or jobs. But the government won’t do that as it costs them money.

This is a good point too. My contract is 35 hours. Sometimes do up to 39(which is full time where i work). However we are often short on hours, so many weeks i am on basic. It is supermarket work and the store hours have been cut a lot of the last 6-8 years. Many employers are the same.

"As for the middle classes, the ultra rich have stripped the wealth away from the working class, now they are doing it to the middle class."

I think this is significant.

The government has huge financial commitments which it is struggling to finance, despite ongoing and increasing debt - and it is looking about to see where it can scrape more money in.

The middle classes still have a significant amount of wealth and so it is being squeezed/taxed to extract that - and this is likely to continue.

It has happened to the US middle classes (Income Share: The aggregate share of national income held by the middle class fell from 62% in 1970 to around 43% in recent years. Meanwhile, the upper-income tier expanded its share significantly (Pew Reserach foundation)

More and more money is going to fewer people at the top, who own massive assets globally and will continue to accumulate these, lobbying weak governments to extract ever more for themselves.

@user1471538275 its hard to see how people can accumulate wealth at present, unless they already have it.

With a student loan, you now are paying >50% in deductions at source, from what is not vastly above the minimum wage.

Accumulating wealth becomes the preserve of the extremely highly paid.

@MidnightPatrol I agree. That's what I was saying.

Accumulating new wealth is almost impossible for someone who does not already have it - social mobility is in decline.

Even the middling wealthy (middle class) are losing their wealth year on year, each generation's lifestyle is declining despite similar jobs.

Only the extremely wealthy are gaining.

Anyway, have drifted off the point a bit - sorry

Last point - wealth is not really linked to work at all any more - not even the highly paid, who are also highly taxed.

It's about wealth accumulating more wealth, without any actual working involved.