Is the National Minimum Wage Working?

I have deliberately left this post about the National Minimum Wage until after the General Election because it is ranting rambling and I did not want anyone to accuse me of cheating their vote.

I don’t often write about politics, especially not the National Minimum Wage. I try not to discuss politics much. Apart from my wife, no-one really know which way I voted in the EU referendum. Even now, some hours after voting, where I put my is between me and the ballot paper.

All around me, people are saying it was the best thing since the white sliced loaf and people everywhere are prospering because of it. When you question it though, you are simply a moron:

I don’t get it. So someone correct me!

National Minimum Wage basics

So the basics are quite simple. Back in the late 1990’s the Government decided that it was going to state a minimum wage for all paid employees across the country.

Over the years there have been numerous increases. Employers are required by law to increase the rate of pay for minimum wage employees, with any employees that spend years hovering just above this wage being increasingly captured into it’s net.

There is no requirement for employees to deserve the pay increase, no need to work hard for it, or show performance.

What I don’t get about the NMW

The minimum wage has never really sat well with me. We are in a country of commercialism where industry largely relies on the supply and demand, and the payment of taxes. So why, all of a sudden, are market rates not working?

If people are getting paid £2 an hour, then the coats of the local economy will reflect that. If a country of people being paid £2 an hour, the wider economy will reflect that.

People paid £2 an hour will not pay £4 for a beer.

If no-one wants to pay £4 for a beer then the price of beer will have to fall; remember though, the company paying £2 an hour has less overheads than one paying £7.40, so there is an off-cost.

People are Scared to Speak Out

Is it that the people who are working the shop floor are worried about losing their jobs? An entire company of staff all complaining they are not paid enough but not prepared to do anything about it? Of course when we were back in the 1970’s, the time that many blue voters want to forget, the shop stewards had a role; fair work for fair pay or the shop floor walked out.

Thatcher broke the unions, in step one of the plan to stop people taking charge of their own future. Now the mere act of daring to take any form of industrial action is viciously attacked, particularly when it’s the junior doctors or train drivers.

Very few workers now have a voice strong enough to take action. So instead they loudly complain that there are massive numbers on zero-hour contracts (via The Guardian) or take their vengeance out on the soothsayers of doom about the NMW.

Zero-hour contracts…. oh yes that will be self-employment.

A Plausible Future – One Wage For All

I was doing some sums. Over the last three years, the National Minimum Wage increased by 3.1%, 7.5% and 4.2%. Last time I checked I would have had to go on strike to get anything more than RPI and it will be a matter of 7 years before I am on National Minimum Wage.

Slowly, more and more people will hit the minimum wage threshold, police officers, fireman, paramedics, nurses, all being paid the same as a shelf-stacker in a supermarket or a commercial building cleaner.

I am not saying that these roles are not important and there are some amazing people that stand out in their workforce and should be on bigger and better things; but what is then to stop the Government of the day nationalising the entire country, paying everyone the same wage for a plethora of jobs? One Universal Credit anyone?

A Probable Future – Discontent

Can you see the skilled public sector professionals taking this? The NHS is continuing to teeter on the edge of a complete relations failure with Junior Doctors as the NHS forces through new contracts and Junior Doctors leave the NHS (via the Daily Mirror) and earlier this year nurses threatened to strike over a tiny 1% pay increase (via Sky News). Think about that for a moment; the NHS consider nurses to not be suitable for a similar pay increase to that enforced by the National Minimum Wage.

I know I was laughed at, when my trade union asked what we should negotiate for in our next pay review. I said we should aim for the same increase as the NMW.

A Plausible Look at Cost

With any increase in costs, a company is going to look at displeasing the shareholders, or displeasing the consumer.

Supply chains are huge. Raw materials, raw material transport, manufacturing, packing and transport to retailers, retailer distribution, the shop front. Six companies having to pay more for staff, six chances for the cost along the chain to increase.

So inevitably for that small increase in your pay, you could be paying far more out for the same product.

…. but there is more….

  • The more you are paid, the closer you get to the tax-free allowance limit, or indeed the more tax you pay
  • If you are claiming carers allowance, at £10 an hour you will now be limited to 11 hours per week to be able to claim it
  • Likewise those on income-based benefits will have to cut their hours to keep qualifying, or potentially lose the cash handouts
  • You will also have to pay more for basic foodstuffs as well as luxury goods.

Why Do We Have NMW?

Is it to make you feel good about having more money for a shorter amount of time?

Or is it really a way for the Government to quietly fill its coffers? One last thing to think about:

  • If you are paid more, the Government will get more back in Income Tax
  • If you no longer qualify for benefits, the Government will keep it in their bank
  • If the cost of goods go up, the Government will get back more in VAT
  • If the cost of Your Living goes up, the Government will simply raise the National Minimum Wage, get more back in income tax, in VAT and get less benefits

IS the National Minimum Wage Working?

Yes…. if you are the Government.