National Minimum Wage- The Debate

How many people earn minimum wage?

  • In Low Pay Commission latest report, they estimate that around 5% of all jobs are minimum wage ones. 15% of these jobs are made up by part-time or temporary work. 
  • Such jobs are more likely to be: part-time; temporary; held for less than a year; in the private sector; in small and medium sized firms; and in certain low-paying industries and occupations.
  • It is estimated that 1.9 million employee jobs (6.7% of all employee jobs) were paid at or below the relevant National Minimum Wage rate in April 2017. The LPC forecasts this will increase to 3.4 million in 2020.
  • In private sector organisations nearly 8% of jobs are minimum wage ones but only 1 per cent of jobs in public sector organisations are.
  • Public sector workers, employed either directly by the state or on outsourced contracts, account for up to 20% of the 6 million people in Britain paid less than National Living Wage (source)

IMPORTANT FACTS – Pros & Cons of the Minimum Wage

The Minimum Wage is a controversial area, with supporters and dissenters. Remember that MyBnk is impartial and you should be able to present both sides of the argument. 

VIDEO- Watch this to get a sense of the debate that is happening around the Minimum Wage being changed to a Living Wage Much of the current debate centres around this idea. 

Arguments in favour of Minimum Wage Laws Arguments against Minimum Wage Laws 
 Increases the standard of living for the poorest and most vulnerable in society Reduces employment – either through a reduction in the number of hours worked by individuals, or through a reduction in the number of jobs
 Motivates and encourages employees to work harder (unlike welfare programmes) 
It excludes low cost competitors from labour markets and hampers firms in reducing wage costs during economic downturns
Stimulates consumption, by putting more money in the hands of low-income people who spend their entire paychecks, usually in the local economy
 Benefits some workers at the expense of the poorest and least productive
Increases the work ethic of those who earn very little, as employers demand more return from the higher cost of hiring these employees
 Can result in the exclusion of certain groups from the labour force
Decreases the cost of government social welfare programs by increasing incomes for the lowest-paid
Discourages further education among the poor by enticing people to enter the job market
Encourages people to join the workforce rather than pursuing money through illegal meansEncourages the automation of industry
 May cause price inflation as businesses try to compensate by raising the prices of the goods being sold

VIDEO- Watch young people debate Minimum Wage in UK Youth Parliament. 

REAL LIFE EXAMPLE: SSE is UK’s biggest officially- accredited Living Wage employer- guaranteeing all employees at least £7.45 an hour. See a short video here.

IMPORTANT FACTS – Pros & Cons of Lower NMW for Younger Workers

Young people may challenge why they receive a lower minimum wage than adults so make sure you can help them identify both sides of the argument. 

Arguments in favour of a lower Minimum Wage for Younger Workers Arguments against Minimum Wage for Younger Workers 
Young workers have less experience and therefore lower productivityMany younger workers are doing the same job as adults. Therefore, if they are doing the same job, it seems unfair to pay a different wage
Young workers may need more training to develop skills and work experience. The costs of training need to be borne by lower wages otherwise the firm couldn’t afford to pay young workers and train themFirms may substitute younger workers for adults as they are cheaper. Arguably, adults need a job more than 16 year old workers living at home
If the NMW for 16 year old workers was the same as for adults, it would be much more difficult for 16 year olds to get a job because firms would rather pay the more experienced workers.
Firms can, of course, pay more than a minimum wage. If they think 16 year olds are doing as good a job, they could give them the same wage
According to The Prince’s Trust around 1 in 5 young people are NEET (Not in Education, Employment or Training). The Minimum Wage may discourage them from working as they make more money if they stay on benefits. 


Evidence on the effects of the NMW (Source)

  • The consensus of the research findings on the impact of the NMW in the UK is that it has not significantly adversely affected employment but that it may have had a small negative effect on hours
  • There is some evidence to suggest that young people may have been adversely affected by the minimum wage