minimum wage

One of the arguments made by proponents of a higher minimum wage or a “living wage” is that it would raise more revenue for the Exchequer. Higher wages would, they argue, mean higher income tax and National Insurance receipts, and lower spending on tax credits; the state would pick up less of the employer’s wage bill. It is an argument that encourages some fiscal conservatives to support a wage hike.

But the government disagrees. 

On Thursday evening, George Osborne said that “I think Britain can afford a higher minimum wage”. Reports suggest that the chancellor would like to see the rate paid to adults over 21 years-old rise to £7 per hour from £6.31 per hour, a jump that could benefit more than 3m employees, at least according to this estimate. 

In the previous post I wrote about the reasons why a rise in Britain’s minimum wage is being reviewed by the main political parties.

Here, again drawing on the work of the Resolution Foundation and the Institute for Fiscal Studies, I suggest the options for how the minimum wage could be increased. 

The astute observer will have noticed that a policy promising to detoxify the Conservative brand, improve living standards, and reduce the benefits bill, is likely to have some problems, regardless of what form the rise takes. The biggest employers of low wage labour are hardly clamouring to support a living wage. A higher minimum wage is not a direct substitute for tax credits and in-work benefits. But there is a growing consensus that the minimum wage could and should be increased – and the Conservatives seem to preparing a gran pf this traditional Labour territory.