Earlier this year, the Low Pay Commission recommended that the National Minimum Wage for adults should rise by 20p to £6.70 per hour. Whilst this is an above inflation rise, and would mean that the real value of the minimum wage would be higher than before the coalition Government came into power, this level leaves a lot to be desired and shows a disappointing lack of vision.
Eye on the Economy
By Ross Baxter*
|The minimum wage will be increasing, but by nowhere near the level it should be. (Photo: www.freeimages.co.uk)
My current job pays above the current living wage, but that has not always been the case. Until very recently, I have always been in jobs that were well below this, often earning on the National Minimum Wage itself, and it has always been a struggle to live on. Bearing in mind that I am looking at this from the perspective of a young person who doesn’t have many outgoings, I can only begin to imagine what it is like for those who do have higher costs, such as single parents. Quite frankly, it is embarrassing to see that as a society, we are willing to let people struggle in this way, and we have got to get this fixed as soon as possible.
A higher minimum wage, set at the level of the living wage, would help to solve so many issues in this country today. Firstly, and obviously, it would ensure that people had enough money to be able to live. It would allow people to live healthier lifestyles, reducing a big burden on the NHS, and it would help with education and literacy, as parents would be able to afford to buy their children simple things such as books.
The Labour Party has said that if elected, they will ensure a minimum wage of £8 per hour by 2020, but this isn’t near ambitious enough, considering that the living wage outside of London is already at a level of £7.85, meaning £8 an hour would, by that time, be massively under the living wage level, as it is now. A minimum (and living) wage by 2020 would need to be at least £10 per hour, as suggested by the Green party, to stand any chance of reflecting the costs of living in modern society.
Evidence has also shown that paying employees a living wage is good for businesses, and according to the Living Wage Foundation companies where it has been implemented have reported seeing absenteeism reduced by 25%. Employers saw a decline in turnover amongst their staff, with PricewaterhouseCoopers (PwC) noting their turnover of contractors reducing from 4% to 1%. What’s more, over 80% of employers also reported increased productivity and quality of work.
It would also have the positive note of benefitting society as a whole, and would give a much needed boost to the economy. Naturally, in receiving higher wages, those who are most affected by an increase at the lower end would have more disposable income to spend. This would inevitably lead to a rise in public consumption as those who previously could not afford to spend much now can. That movement of money within the system would allow businesses to be able to afford the rise that they have implemented. A living wage would also have a positive effect on public finances, as it would lead to an increase in tax revenue, with less benefits being needed to supplement the incomes of those already in work.
|People on low incomes are currently forced
to lock away any disposable income, saving
for a rainy day, and are not able to help
stimulate the economy by spending. A living
wage would help to change that.
Whilst reforming the National Minimum Wage, the age brackets that are currently in place should be scrapped, and all people who work should be guaranteed the same minimum level. Allowing employers to pay 16-20 year olds less, solely based on their age is not only discriminatory, but also completely illogical, as a number of this age bracket are not able to rely on their family for financial support. Furthermore, if you think it’s difficult to live on £6.50 per hour, (as the National Minimum Wage currently is), then it is near impossible to live on £5.13 (for 18-20 year olds) or £3.79 (for 16 and 17 year olds). We would also need to scrap the separate minimum wage for apprentices of any age, and ensure that they are paid the same level as any other working person.
It has been argued that increasing the NMW by such a large amount would increase unemployment due to the increased cost of production it represents for businesses. However, what with the high competition for jobs, it is clear that businesses have been suppressing wage rates, keeping them below the market rate. The job market therefore can afford this, as an increase would be taking the minimum to a realistic level, rather than increasing it from one. Various studies and papers have also shown that in practice an increase does not lead to a variation in employment figures. Indeed, when the Minimum Wage was first introduced in the UK, the same worries were raised, but were found to be without merit, as the Minimum Wage is now much higher in real terms than when it was introduced, and this has not led to a higher level of unemployment.
An appropriate living wage has been shown both in theory and in practice to improve not only the lifestyles of the people who are paid that level, but also the society and the country that those who are paid it live in. It would also set an example to the rest of the world, proving that everyone can benefit from such policies, and with time, it has the potential to lead to a much greater planet for us all.
*Ross Baxter is a 25 year-old, Green Party member.
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