The realities of the National Minimum Wage

An highy revealing article appeared in The Guardian the other day about how the Minimum wage fails to close pay gap (Larry Elliott).

The article is based on three questions. Question one is - "whether even after several years of rising faster than inflation or earnings, the NMW is even now high enough." The answer to the question is - "In terms of providing a living wage, the answer is no, since the government has had to introduce tax credits to top up low earnings."

A second question asks - "whether the NMW could be increased to become a living wage without costing jobs. The answer to this questions is - "The evidence so far is that the NMW has not cost jobs, but clearly there would be some level at which employment would suffer.

The final question asks - why hasn't the combination of NMW and tax credits resulted in a reduction in income inequality? The answer is - together they "preserve existing levels of income inequality."

Some further interesting stuff to come from the article includes:

1) The lowest incomes tend to suffer higher levels of inflation than those at the top.
2) The share of income owned by the top 1 per cent of the population in the UK is back to pre-second world war levels.
3) 60 per cent of people earn less than £20,000 a year, 80 per cent less than £30,000.

Point three really stands out for a person who works in HE. That is, if 50 per cent of young people now hold degrees or a HND, only a fraction of graduates will ever earn what most of them see as being reward for investing so much time and energy into their education.

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