In the words of Nye Cominetti, economist at the Resolution Foundation think tank, “The United Kingdom has embarked on a full-scale economic experiment”. For five years, the country of Margaret Thatcher and the liberalized labor market has suddenly caught up with its minimum wage.
Since 2015, it has increased by a third, while inflation has climbed by 20%. Currently 8.91 pounds sterling (10.63 euros) per hour, it has reached the level of the French minimum wage (10.57 euros). In April, it will again jump 6.6%, to 9.50 pounds (11.30 euros), clearly exceeding that of France.
“All economists think that from a certain level the minimum wage will end up reducing the employment rate, but nobody knows from when, summarizes Mr. Cominetti. The UK is increasing it gradually, experimenting year after year. And, for the moment, there is no effect on employment. “ In the midst of the Covid-19 epidemic, the British unemployment rate peaks at … 4.2%. There are even today 420,000 more jobs than before the health crisis (at 29.4 million).
“The indirect effects are striking”
This policy dates back to the Conservative government of David Cameron. At the time, George Osborne, the Chancellor of the Exchequer, wanted to save money. But with wages stagnating since the great financial crisis of 2008, many households are suffering, and social assistance continues to be important. He wants to reverse the dynamic. “We need to move from an economy with low wages, high taxes and welfare to a country with higher wages, and lower taxes and welfare. “ He sets a goal: gradually increase the British minimum wage to 60% of the median salary, while it was then just below 50%. With strong increases, it was done in April 2020, without encountering major difficulties among employers. “Employees had more bargaining power than we imagined”, notes Mr. Cominetti.
« Concerns that the minimum wage would lead to major price hikes and large job losses have so far been unfounded, ”Chris Hare, economist at HSBC
Furthermore, no negative effect on employment was recorded. “It’s the story of the dog that didn’t bark, says Chris Hare, an economist at HSBC. Concerns that the minimum wage would lead to major price hikes and large job losses have so far been unfounded. “
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