National Minimum Wage v’s Living Wage (2015 Edition)

So the Living Wage folks yesterday told us that for 2015 the Living Wage (outside of London) is £7.85/hour.

Running the numbers and comparing them to the National Minimum Wage (NMW) of £6.50/hour we get the following:

NMW LW
Gross Pay (£) 12,675.00 15,307.50
Income Tax (£) 535.00 1,061.50
Employee’s National Insurance (£) 566.28 882.18
Employer’s National Insurance (£) 651.22 1014.51
Nett Pay (£) 11,573.72 13,363.82

The difference between the Nett LW and the Gross NMW is £688.82 per annum. Over a year (52 x 37.5 hour weeks = 1950 hours) that is an extra 35p per hour – or £1 less than the LW.

Raise the NMW wage to £6.85/hour, the starting rates of Income Tax and National Insurance to £12,675 and, hey presto, we have the so-called Living Wage.

Simples.

6 Comments

  1. john77 says:

    Better would be to abolish the NMW and let companies pay interns what they are worth rather than nothing and let them hire people who are worth something but nowhere near £6.50 per hour.

    • Misanthrope Girl says:

      I agree with you but I can’t see that happening (it would be politically disastrous). Therefore, since we are stuck with it, lets not tax those who are on it.

  2. Demz says:

    Dunno, I’m in two minds.

    On the one hand it seems pointless to mandate a minimum wage and then for government to take some of it away.
    OTOH, by paying just a little tax it means that Minimum wage workers (full time ones, anyway) have a stake in how the government spends their money.

    • john77 says:

      OTOH, by paying just a little tax it means that Minimum wage workers (full time ones, anyway) have a stake in how the government spends their money.
      Like spending more on collecting that little tax than the amount of money collected!
      No-one should simultaneously pay income tax and receive tax credits. “Those whom the gods wish to destroy, they first make mad”

  3. Dioclese says:

    I’m great believer in paying staff what they are worth. I do have a caveat that I would tell them exactly why I think they are worth that. That seems fair to me but I doubt most employers actually have the balls to do it. I used to do exactly that and if the staff member in person didn’t like it then they were free to work elsewhere.

  4. Bunny says:

    How about stripping the size of the government right back to the bare bones so the indirect taxes are a lot less and then seeing how much the ‘living wage’ needs to be. Really I think even the unemployed have a stake in how the government spends its money, just the reduction in indirect taxation would make a difference to those on benefits. Also hopefully it would free up money in the economy to making everybody wealthier.

    I have just realised how naïve that actually, that would mean the civil service, the fake charities all being cut drastically in numbers and there is no way on God’s earth that they would do that.