Every now and then, the government increases the minimum wage only to be met by massive public approval with the majority of the people not actually understanding the negative impacts that it has on society for people who are looking for work for the first time.
For the past 20 years, it has become harder and harder for people leaving schools and colleges to find work. This is in part due to the minimum wage being increased. So why is it that this happens?
The minimum wage is something the government can increase whenever it likes, and it looks good on the government, I mean, who doesn’t want more money? The main issue here is that the government does not have to pick up the tab for increasing the minimum wage. This is something that every employer across the UK has to pay for.
So how do employers handle rises in the minimum wage?
1: Removal of staff benefits. Staff benefits can include things like paid breaks, medical treatment, pay bonuses, and staff discounts can end up being reduced. This has a negative effect on morale and sometimes results in people working for less than the minimum wage in the health sectors and others where breaks are not guaranteed. Very often this will be handled in a renewal of contract with the staff which will look pretty standard, but will overall cut down on their benefits of working for their employer.
2: Redundancies. If the employer cannot afford to maintain as many staff at their business as they currently have employed, they will have to unfortunately make redundancies. They will pick employees who either do not fit in well with the team, newer employees or employees who show poor work and teamwork ethics and let them go. If you are worried about being made redundant from your job, you can find out more about your rights here
3: Hiring experienced workers. Put yourself in the position of an employer. Who would you rather have on your staff – an experienced worker with a long history of performing well in their job and with fantastic references or someone who is fresh out of school? There is a lot to be said for hiring an inexperienced worker as they can be shaped well into the right kind of employee for your company, however if you have to pay people the same, you are going to want to hire someone who’s experience makes them more valuable. In the UK, people in different age bands get a differing minimum wage, which offsets the problem slightly, but many employers would rather get an experienced worker, or worker more in line with the job if possible. Having a minimum wage means that an employer must be discerning over who they hire and why, meaning that if you are a school leaver, it is advised you do some work experience and volunteer. A few months volunteering will give you the experience needed to compete with other school leavers who may only have academic achievements and no experience.
4: Uniform Salaries: Many years ago, it was the decision of the employer and employee what the arrangement for work was. A worker would work for a wage that they and their employer agreed on. With an ever increasing minimum wage it is becoming harder and harder for employees to barter with their employer over their wages. Why should an employer pay anything more than the minimum wage when they can replace you at the drop of a hat? Minimum wage increases job seekers desperation to get a job meaning that replacement is a lot easier, which reduces your chances of being able to have some leeway when it comes to arranging how much you are paid.
What does this do to the workplace?
As a worker, you will expect a lot less in terms of benefits from your employer, any benefits you used to get will most likely be reduced or removed. You may end up with a decreased weeks’ worth of work hours, the stress of which is created both by redundancies, meaning the workforce has to compensate for the loss of people, and potentially the removal of paid breaks. This will result in workers having to work a lot harder.
How will increasing the minimum wage affect my taxes?
If your work week does not decrease in it’s paid hours, you will be hitting your tax threshold a lot sooner than normal. In the UK we have a threshold wherein an employee can earn a specific amount of money before taxes start to be taken. This is increased by political parties which want to help people struggling financially and has risen steadily over the past few years to help compensate with the damaging effects of austerity in the UK, largely caused by the EU.
An increase in the minimum wage without this compensatory measure results in employees reaching a point at which they are taxed earlier, which lowers the optimum benefits of working a full work week.
But doesn’t increasing the minimum wage increase what I earn?
Technically, the number you will have at the end of the year is higher but no. The other negative effect of increasing the minimum wage is that the cost of living will increase.
Employers don’t just cut back on their staff and staff benefits when the minimum wage increases. They also increase the costs of goods and services in order to help compensate for the costs of employing their staff at a higher rate. This affects every single industry from food to housing, and has a massive negative effect that is felt by everyone… It doesn’t stop there though. Because we have VAT and Sugar tax among other little taxes here and there, companies make their adaptations to cope and then the taxes are added to products and services on top.
Whenever the minimum wage increases in the UK, everyone feels the negative effect. People on benefits end up with less value from the money they get in, pensioners find themselves struggling to handle increasing prices and the workers all get screwed over. The minimum wage as a positive idea is an illusion and does serious damage to our society. It limits an employer’s choices when hiring and retaining staff, and ultimately damages our economy.
