“From April 1st Britain’s minimum wage is to be rebranded as
the “national living wage” (NLW) and made more generous. The legal wage floor
for those aged 25 or older rises from £6.70 ($9.60) an hour to £7.20; by 2020
it will be worth roughly £9 an hour. Touted as a measure to help the lowest
paid, whom globalisation has not treated kindly, Britain’s new NLW is being
watched closely by other countries.” The article from the Economist talks
heavily on how an increase in the minimum wage is not as a nation is not all
that beneficial. Though, roughly 1.8 million people will be paid a higher wage,
economists argue that the assumption that companies will bare this extra cost
burden is illogical. This gross-assumption does not anticipate the amount of
people who will lose jobs to cut company costs. Furthermore as argued in the
article “…whereas many poor Britons do not work at all. According to the
Resolution Foundation, a think-tank, a household in the seventh income decile
(ie, nearer the richest) will benefit three times as much as someone in the
bottom decile.” This basically says this policy will help the upper-middle class
(slightly above actually) far more than it will help the lower classes. Sounds
mildly counter-intuitive to what Britain’s try to prevent? That’s because it
is. Furthermore, The Economist argues that many car facilities will go bust if
there minimum wage is raise to what it predicted at the chart above. Does this
raising of minimum wage fit into the voodoo economics?
P.S: unable to place chart into blog, but if you look at the article online it will help with making sense of what I have written.
http://www.economist.com/news/britain/21695959-who-benefits-introduction-national-living-wage-poor-economics
Brett! What a well-written post and what an interesting article! I truly find it quite peculiar that countries continue to consider drastic changes in the minimum wage, despite all of the evidence that points to the minimum wage not being very effective for both those it's trying to help as well as the economy as a whole. I'm sure the United States will be watching England's economy closely once this goes into effect in order to gauge the success of such a move.
ReplyDeleteTrey! What a great comment to a great blog! I agree, I think that people around the world should stop and think about what increasing the minimum wage actually does. People just see wages increase and think that it is a good idea because they make more money but they never look at the big picture. Hopefully people in the United States and the world will watch Britain and learn from them.
DeleteI understand that raising the minimum wage will result in job losses for some. the only question I have is how the raise will benefit the middle income families more. Wouldn't they remain unaffected?
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ReplyDeleteWell the article does not specifically talk about the middle class, but realize that minimum wage generally doesn’t deal with the middle class. Furthermore, one thing I did not mention in the above comments was that this wage increase is expected to create a negative effect on hours worked. That is to say, that hours people are employed will drop! Also industries such as hospitality are likely to decline, so if you consider the lower middle class, they will feel these effects. To be clearer, the article is really saying that the British goal was to help the lower class, but the numbers are saying that the policy will do otherwise.
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