Thoughts on the National Minimum Wage
According to news today, the Deputy Prime Minister Nick Clegg is to offer bribes subsidies to employers of up to £2,275 to employ some of the estimated 1.163 millions young people not in education, employment or training (NEETs).
Doing some back of a fag-paper calculations using a 40 hour week for 52 weeks a year (a total of 2080 hours) as a guideline:
| Age Group | 18 – 20 | 21+ |
|---|---|---|
| National Minimum Wage (NMW) (£) | 4.98 | 6.08 |
| Yearly Wage (£) | 10,358.40 | 12,646.40 |
| Employers NI (£)* | 453.52 | 769.27 |
| Total Cost to Employer (Year) (£) | 10,811.92 | 13,415.67 |
| Total Cost to Employer (Hour) (£) | 5.20 | 6.45 |
| 6 Month Cost (£) | 5,405.96 | 6,707.84 |
| 6 Month Cost after subsidy (£) | 3,130.96 | 4,4323.84 |
| Hourly Wage after subsidy (£) | 3.01 | 4.26 |
| Difference between pre and post subsidy Hourly Wage (£) | 2.19 | 2.19 |
| Percentage of pre subsidy wage (%) | 42.12 | 33.95 |
| Percentage of post subsidy wage (%) | 72.75 | 51.41 |
* Figures obtained via Listen to taxman
If the government is having to subsidise employment for some people by at least a third, the only logical conculsion surely is that the NMW is too high?
A bit late commenting on this, but the clue is in the name of the wage. “National”. How can the same minimum wage be applicable in London with its high costs and Newcastle where the cost of living is a lot cheaper. It’s probably a bit too low in London and way too high in Newcaslte.
Exactly. Hopefully, given that the Osbourne mentioned ending national pay bargaining in the Autumn Statement, such a change is perhaps being considered.