Ted Grainger is Network Manager at Fighting for a Free Future, and a former Parliamentary Researcher.
3.9 per cent. Is that good? Well, it depends on the context. GDP growth? Absolutely. I would be delighted if growth was at 3.9 per cent.
The increase in the minimum wage next year? No. A flat 3.9 per cent increase across all rates would be awful, especially considering how high it already is.
It is with great regret that I inform you growth is nowhere near 3.9 per cent, but the minimum wage increase is. Next April, the headline rate of the NMW will hit £13.21 for over 21s. Simply put, the minimum wage is out of control.
The full-time salary of next year’s rate, assuming a 37.5 hour week, comes to £25,749.50. To put into context how absurdly high this minimum wage is, in Scotland next year, a full-time minimum wage worker will be just under £4,000 off of paying the intermediate tax rate.
I find the zealots who always push for a higher minimum wage rather ridiculous. We know, of course, that any increase in the minimum wage means that the cost of hiring goes up and therefore businesses will hire less. The Green Party, however, do not accept this logic. They find it inconceivable that a business might adjust their expenses accordingly. Therefore, at the time of writing, they are committed to a £15 an hour minimum wage.
Why £15 though? If increases to the minimum wage do not, in fact, lead to more people being out of work, why not just whack the minimum wage up to a £100 an hour? We could all be rich if it wasn’t for those nasty ecologists setting their sights so low.
Back in the real world, meanwhile, there are almost one million young people considered not in employment, education or training. Now, it would be far too strong an argument to suggest that this has been caused as a direct result of a high minimum wage. When you combine its effects, however, with the Employment Rights Act and the Employers’ National Insurance hike, that is how you end up with one million NEETs.
It is important to understand where exactly this absurd increase in the minimum wage has come from. A statutory minimum wage is a bad idea full stop. But it’s clear that its increases overtime have made it far worse than it was when first introduced by Tony Blair. The first minimum wage was £3.60 for over 22s. If, when it was first introduced, it had merely been introduced every year exactly in line with CPI, it would be roughly £7.16. The reason why it is nearly double this amount instead, is because of a deliberate policy choice.
With the creation of the NMW also came the Low Pay Commission (LPC). In classic Tony Blair style, the then PM wanted to absolve the government of any responsibility to carry out their own policies. So instead, the LPC was created to “advise” the Business Secretary of what increases should be made. Rare is it that a government has chosen to not accept the recommendations of the LPC in full.
Often though, this is not out of cowardice or a fear of locking horns with this quango, but because the LPC have actually carried out exactly what the government have wanted them to do. Since 2019, a few years and a pandemic before the explosion of the minimum wage, the Government – not the LPC – introduced into the LPC mandate the target of getting the NMW at two thirds of median incomes. This target has remained in place every year since.
This was a target introduced by a Conservative government and it is the number one reason why the minimum wage continues to rise every year despite the pleas of business owners. Setting the absolute floor that someone can earn so close to the average salary will inevitably create a massive wage compression of earners from high skilled to low skilled, followed by a cliff edge down to the many unemployed.
What we now have is a huge number of people earning essentially the same amount of money. This includes some graduates, but mainly early to middle career professionals who then have little room for wage growth having already started so high. That is, if they have indeed started high at all. What is more likely is that, as a graduate, they have become just one of the one million NEETs. Or, in other words, not employed at all.
The minimum wage is far too high. Quite frankly, a government interested in getting young people back into work would abolish it outright. Though admittedly, that may be politically difficult.
Instead, the good folks at the Prosperity Institute have come up with a better idea. Simply freeze the minimum wage for five years and allow fiscal drag to slowly erode away its effect on the labour market. The effect of course would be more young people entering the workforce and of off state reliance thus netting the Treasury billions more every year.
Ted Grainger is Network Manager at Fighting for a Free Future, and a former Parliamentary Researcher.
3.9 per cent. Is that good? Well, it depends on the context. GDP growth? Absolutely. I would be delighted if growth was at 3.9 per cent.
The increase in the minimum wage next year? No. A flat 3.9 per cent increase across all rates would be awful, especially considering how high it already is.
It is with great regret that I inform you growth is nowhere near 3.9 per cent, but the minimum wage increase is. Next April, the headline rate of the NMW will hit £13.21 for over 21s. Simply put, the minimum wage is out of control.
The full-time salary of next year’s rate, assuming a 37.5 hour week, comes to £25,749.50. To put into context how absurdly high this minimum wage is, in Scotland next year, a full-time minimum wage worker will be just under £4,000 off of paying the intermediate tax rate.
I find the zealots who always push for a higher minimum wage rather ridiculous. We know, of course, that any increase in the minimum wage means that the cost of hiring goes up and therefore businesses will hire less. The Green Party, however, do not accept this logic. They find it inconceivable that a business might adjust their expenses accordingly. Therefore, at the time of writing, they are committed to a £15 an hour minimum wage.
Why £15 though? If increases to the minimum wage do not, in fact, lead to more people being out of work, why not just whack the minimum wage up to a £100 an hour? We could all be rich if it wasn’t for those nasty ecologists setting their sights so low.
Back in the real world, meanwhile, there are almost one million young people considered not in employment, education or training. Now, it would be far too strong an argument to suggest that this has been caused as a direct result of a high minimum wage. When you combine its effects, however, with the Employment Rights Act and the Employers’ National Insurance hike, that is how you end up with one million NEETs.
It is important to understand where exactly this absurd increase in the minimum wage has come from. A statutory minimum wage is a bad idea full stop. But it’s clear that its increases overtime have made it far worse than it was when first introduced by Tony Blair. The first minimum wage was £3.60 for over 22s. If, when it was first introduced, it had merely been introduced every year exactly in line with CPI, it would be roughly £7.16. The reason why it is nearly double this amount instead, is because of a deliberate policy choice.
With the creation of the NMW also came the Low Pay Commission (LPC). In classic Tony Blair style, the then PM wanted to absolve the government of any responsibility to carry out their own policies. So instead, the LPC was created to “advise” the Business Secretary of what increases should be made. Rare is it that a government has chosen to not accept the recommendations of the LPC in full.
Often though, this is not out of cowardice or a fear of locking horns with this quango, but because the LPC have actually carried out exactly what the government have wanted them to do. Since 2019, a few years and a pandemic before the explosion of the minimum wage, the Government – not the LPC – introduced into the LPC mandate the target of getting the NMW at two thirds of median incomes. This target has remained in place every year since.
This was a target introduced by a Conservative government and it is the number one reason why the minimum wage continues to rise every year despite the pleas of business owners. Setting the absolute floor that someone can earn so close to the average salary will inevitably create a massive wage compression of earners from high skilled to low skilled, followed by a cliff edge down to the many unemployed.
What we now have is a huge number of people earning essentially the same amount of money. This includes some graduates, but mainly early to middle career professionals who then have little room for wage growth having already started so high. That is, if they have indeed started high at all. What is more likely is that, as a graduate, they have become just one of the one million NEETs. Or, in other words, not employed at all.
The minimum wage is far too high. Quite frankly, a government interested in getting young people back into work would abolish it outright. Though admittedly, that may be politically difficult.
Instead, the good folks at the Prosperity Institute have come up with a better idea. Simply freeze the minimum wage for five years and allow fiscal drag to slowly erode away its effect on the labour market. The effect of course would be more young people entering the workforce and of off state reliance thus netting the Treasury billions more every year.