September 18, 2015
New UK minimum wage criticized by employers
The UK government’s plans to increase the minimum wage for over-25s has come under criticism from employers, some of whom say they will have to cut back on recruitment as a result.
A survey by the employment agency Manpower showed that the UK jobs market is at its least optimistic for three years as a result in the change to the law, with some firms planning to rely on self-employed workers or freeze recruitment.Meanwhile, a separate study published by the Association of Convenience Stores showed that 24,000 shops could be threatened by closure as a result of the new wage, potentially putting 80,000 jobs at risk.
The UK hospitality firm Whitbread, which owns chains of coffee shops, restaurants, and hotels, has recently said it will probably take on fewer staff due to the increase, while the chairman of pub chain Wetherspoon has described the policy as “unrealistic” and threatened that pub closures may follow.
However, the German-owned retailer Lidl has announced it will be voluntarily paying the Living Wage Foundation’s recommended minimum of £8.20 an hour (or £9.35 in London) to its staff in England, Scotland, and Wales from October.
From April next year, the UK minimum wage for workers over 25—which the government calls the “national living wage”—will be at the higher rate of £7.20 an hour, rising to £9 by 2020. The minimum wage is currently £6.50 for over-21s, with lower rates for younger people.
Recent analysis by the House of Commons Library, which provides research services for British MPs, found that families living on the minimum wage will be financially worse off from April despite the increase, due to simultaneous changes to the UK’s tax credit system.
A further study by the Resolution Foundation think tank argues that the new wage will be affordable for the “vast majority” of employers, with the UK’s total wage bill rising by only 0.6% as a result of the policy.
The economic risks and benefits of minimum wage legislation are controversial. Our author David Neumark argues that introducing or raising minimum wages reduces the number of jobs available to lower-skilled workers, and that minimum wages do not necessarily benefit the poorest households.
Similarly, Daniel Hamermesh argues that minimum wages have small negative effects on employment, albeit while raising earnings for those low-wage workers who remain employed.
Read more on this story at the Guardian, the Financial Times, and Sky News.
Related articles:
The minimum wage versus the earned income tax credit for reducing poverty by Richard Burkhauser
Employment effects of minimum wages by David Neumark
Who benefits from the minimum wage—natives or migrants? by Madeline Zavodny
Do labor costs affect companies’ demand for labor? by Daniel S. Hamermesh
Do minimum wages induce immigration? by Corrado Giulietti