The influence of this work was one of the reasons that Card was a co-recipient of the 2021 Nobel Prize in economics. They argued that the empirical evidence linking the minimum wage to job losses was weak. What changed minds was partly the research of two economists in the United States: David Card and Alan Krueger. Today, many – though not all – economists think that this view is over-simplistic and that appropriate levels of the minimum wage need not cause job losses. Thirty years ago, most economists would have said that any level of the minimum wage inevitably costs jobs as they believed that it is a basic principle of economics that the demand for labour always falls as wages rise. If the minimum wage makes labour too expensive, there will be fewer jobs.īut how high can the minimum wage go before we start to see job losses? Economists disagree on the answer to this question. Firms will only employ workers if they think that the value of what they produce is greater than what the worker costs. The main concern that economists have is that there may be job losses if the minimum wage is set at too high a level. Many people think there is something very wrong with an economic system in which someone who works hard is still unable to provide an adequate standard of living for themselves and their families. Even though the minimum wage is often thought of as a ‘left-wing’ policy, majorities of Conservative voters also support rises in it. For example, a September 2021 opinion poll found that two-thirds of people in the UK supported a policy of ‘the minimum wage rising gradually over the next few years to £15 an hour’. The minimum wage is popular with the public, and so political parties tend to support it. Nevertheless, it is a useful part of the policy toolkit to address poverty. Whether a household is in poverty also depends on the number of people in the household and how much they earn. It is an hourly wage and many people are in poverty because they work few or no hours. It can also help to reduce wage inequality and poverty.Ī minimum wage cannot be used to eliminate poverty on its own. On the economic side, a minimum wage can help to prevent the exploitation of vulnerable workers by unscrupulous employers. In real terms – in other words, adjusted for inflation – pay excluding bonuses dropped by 2.8% in March to May 2022 compared with the previous year, according to new data from the Office for National Statistics (ONS). But it is lower for younger workers: for example, those aged under 18 are only guaranteed £4.81 per hour.īut as the cost of living is going up, workers’ wages, especially those on the minimum wage, are being squeezed. Since April 2022, the UK’s minimum wage has been £9.50 for those aged over 23. The UK – like most high-income countries – has a minimum wage, which sets the lowest legal hourly wage an employer can pay to workers.
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