UK minimum wage rise divides commissioners

UK commissioners are split over whether or not to recommend a minimum wage rise ahead of the next general election.

Members of the Low Pay Commission will meet in the coming weeks to discuss a potential 50p-an-hour rise in the national minimum wage to £7.00.

In October last year, the adult minimum wage was increased from £6.31 to £6.50, in line with inflation. The UK’s Labour party has already pledged to raise the minimum wage to £8.00 an hour if it gains power in May's general election.

Research from the Confederation of British Industry indicates that more than two fifths of UK firms intend to raise pay at the same rate of inflation this year.

It is understood that many areas of British industry, including retail, would be opposed to a £7.00-an-hour minimum wage.

Commissioners are set to put forward their recommendation in February this year.

Minimum wage rates are often a contentious issue, as policymakers battle between improving employee welfare and maintaining productivity. David Neumark shows that minimum wage increases "are often offset by job destruction," and can discourage some employers from using low-wage, low-skill workers. He posits that other policy measures are required to help poor and low-income families.

David S. Hamermesh reiterates this point, commenting reducing the number of jobs may also "reduce the total amount of work done in any economy." While wage rises should not be discounted, he urges policymakers to be aware of the possible negative consequences.

Read more here.

Related articles:
Employment effects of minimum wages, by David Neumark
Do labor costs affect companies’ demand for labor? by Daniel S. Hamermesh