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Is a £10 Minimum Wage on the Horizon?

Talk about a “real Living Wage” is a regular occurrence in most developed nations. Often, questions regarding the lifestyle the minimum wage should support are common. Additionally, whether these jobs are intended to support a person throughout their adulthood is often considered. Some see minimum wage positions as stepping stones, a way to reach higher earnings in the future. Others believe that these jobs have long-term career potential.

Currently, the government plan is to raise wages up to £9 per hour by the year 2020. However, shadow chancellor John McDonnell expressed an interest more than just increasing the minimum wage. And, he believes it should move up to £10 per hour.

At this time, many workers find prevailing wages challenging to live on. Additionally, the cost of living outpaces income increases. The goal of a £10 minimum wage is to let the most vulnerable in the country manage rising costs effectively.  Specifically, the costs of rent, regular bills, and life’s other essentials.

Support for the Increase

Aside from the open support by Mr. McDonnell, most labour unions are supportive of the recommendation. The increase allows more workers to properly maintain their financial lives. If wages don’t increased to compensate, the lower paid workers may simply be overwhelmed by their financial obligations.

Concerns About the Increase

Many businesses express concerns about the potential increase. Small businesses may have a particularly difficult time adjusting to higher wage requirements, as they tend to have less room in their operating budgets. The concern is that a requirement change of this nature could lead to small businesses releasing employees, favouring automation over employees, and even outsourcing certain tasks.

Understanding the Costs

An increase of £1 or £2 per hour doesn’t sound very dramatic, unless it is examined in a larger sense. A £10 minimum wage would result in the lowest paid being eligible for an annual salary of £19,250. Though, the costs for the employer associated with the change would rise to £23,000.  And, that rise in cost is for each employee who received increased wages.

While that sounds positive to anyone currently working for minimum wage, there is risk.  For example, the fear that the increase would eliminate certain entry-level jobs from the market is real. Further, younger workers and apprentices may have few options. Additionally, those with limited work history or skills may also suffer.

Understanding the Goal

Mr. McDonnell’s plan focuses on the idea of having wages more accurately reflect the current strength of the economy. Under this plan, the minimum wage increases accurately reflect increases in other areas of the job market. Essentially, the minimum wage would be adjusted to keep pace with wage shifts in other positions, better aligning those workers’ wages with the cost of living.

Current National Living Wage and National Minimum Wage

As of 2016, the National Living Wage, available to those age 25 and older, is £7.20 per hour. For those certain apprentices who are eligible for the lowest wages, the current rate is £3.30 per hour.

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