The Minimum Wage Paradox

The most obvious and apparently most simple way to deal with the Cost-of-Living Crisis is just to put the National Living Wage Rate up, as the Tories have planned for the 2022/23 Tax Year that begins in April.

Most low wage earners will jump at the opportunity to earn 50p an hour more, which works out as £20 extra for a 40-Hour Week and £1000 over the course of the year.

The problem that we now face in this respect alone is that prices of everyday items and energy on their own are likely to swallow up that amount from the pockets of many before the changes have even come into effect.

Whilst a Minimum Wage requirement seems like a very logical rule to have, the rather depressing and counterintuitive flip side of the National Living Wage is that it gives big employers a get out of jail free card when it comes to setting a realistic wage level for frontline roles within their business.

Greedy owners, shareholders and managers – often themselves being paid many times more than their frontline staff – are very happy to use the Minimum Wage benchmark because the Government has set the standard. And it works very well for them because there is an assumed belief that Government control is as far as it goes.

Companies are quite literally using the reference point of the National Living Wage as an excuse not to pay more, when in many cases there is no doubt that they could.

The dilemma is that without the Minimum Wage – as was the case until 1999 – businesses will always pay the lowest paid workers the absolute minimum that they can. They would surely return to this way of employing staff in minimum wage levels were to be scrapped.

Just because employers can get away with anchoring wages around the level of the National Living Wage, it doesn’t follow that they actually should.

Many larger businesses could afford to pay staff more right now by reducing their profits. But as so many of these companies are now shareholder-led, there is an expectation that the bottom line and the dividend payouts will always be prioritised above employees instead.

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