Relieving the problems of the poor needs more than ‘sledgehammer’ of minimum wage increases, says IEA
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“It’s not surprising that the number of low-paid workers has fallen, given the substantial increases in minimum wage rates, and in particular the National Living Wage. However, government wage-setting is not a particularly effective way of reducing in-work poverty, let alone improving the lot of those who are not working at all.
“Most low-paid workers do not live in poor households, and many of the beneficiaries of minimum wage hikes are students, the semi-retired who are adding to pensions, and second-earners in families. A high proportion of beneficiaries are working part-time so the notion of a ‘living wage’ is misleading, as even at £10 an hour a minimum wage would not produce a decent living if you only work 10 hours a week and have no other income.
“So far successive increases in the real value of minimum wages have not had a noticeable effect on employment, but it cannot be assumed that further sharp increases won’t effect jobs. We should not put the benefits of the UK’s flexible labour market at risk, particularly at this time of uncertainty.
“Low pay and poverty are not synonymous and relieving the problems of the very poor need more subtle policy rather than the sledgehammer of minimum wage increases”.
Notes to editors:
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