Over the years the fear that the minimum wage would cause increased unemployment has not materialised, although since the start of the current economic crisis employers have expressed some concerns that employment may be affected in low paid jobs. Another concern has been the belief that a national minimum wage is inappropriate for an economy where costs and labour market conditions vary significantly between regions. The national minimum wage may perhaps provide a living wage in North-East England but certainly not in London.

1. Robert Nutter Watford Grammar School for Girls January 2013
Who’s for a Living Wage?
In 1999 the UK introduced a national of living data the London Living Wage is calculated
minimum wage of £3.60 per hour. Since by the Greater London Authority. A Living Wage for
then it has been raised each year in October; the rest of the UK is calculated by the Centre for
it now stands at £6.19 per hour. There are Research in Social Policy. At present the Living Wage
in London is £8.55 per hour and for the rest of the
lower hourly rates for the under 21s and UK it is £7.45. Employers choose to pay the Living
under 18s. Wage on a voluntary basis.
Over the years the fear that the minimum wage Anecdotal evidence suggests that paying the Living
would cause increased unemployment has not Wage benefits employers who agree to pay it instead
materialised, although since the start of the current
of the minimum wage to their low paid employees.
economic crisis employers have expressed some
According to the Living Wage Foundation web site
concerns that employment may be affected in low
paid jobs. Another concern has been the belief that 80% of employers think that paying the Living Wage
a national minimum wage is inappropriate for an enhanced the quality of work, reduced absenteeism
economy where costs and labour market conditions by 25% and boosted retention rates by 66%. In
vary significantly between regions. The national addition 70% of employers felt that paying the
minimum wage may perhaps provide a living wage Living Wage enhanced their reputation as an ethical
in North-East England but certainly not in London. employer. The ‘ethical’ Body Shop pays the Living
Wage but Sainsbury and Tesco do not. Indeed
It was in east London in 2001 that the inadequacy Sainsbury take the view that the attractiveness of a
of the national minimum wage for low paid workers job should not only be assessed merely on the basis
in the capital was brought into focus by a group of of pay, they argue holidays, perks and pensions are
families who could not make ends meet even with just as important. It has been calculated that 45,000
two minimum wage jobs. They formed the Living workers have been lifted out of ‘in work’ poverty as a
Wage Foundation which with the support of the result of being paid the Living Wage, putting £210m
Greater London Authority presses the case for more into their pockets than if they had been paid
employers in London to pay just the minimum wage.
a living wage rather than
the lower minimum However, the Living Wage has been criticised by
wage. Using cost the Adam Smith Institute, a supporter of free market
economics. They argue that if the national minimum
wage was raised to the same level as the Living
Wage it would endanger the employment prospects
for low skilled and young workers. Significantly the
Adam Smith Institute states that the pre-tax national
minimum wage is greater than the after tax Living
Wage. Accordingly they argue that a better option
is to raise the personal income tax allowance to
£12875 rather than increase the minimum
wage. The coalition government has talked of
possibly raising the tax allowance to £10000
but can a measure of this kind be afforded with
such a large fiscal deficit?

2. Robert Nutter Watford Grammar School for Girls