How a national living wage can be economically viable and beneficial

By Michael Green

A minimum wage of £7.45 per hour, coupled with corporation tax cut for small and medium size businesses is economically viable in the UK. It would lift millions of adults out of poverty, and children too. The current minimum wage of £5.73 per hour coupled with zero tax paid, is not enough to live on for one person, and falls below the poverty level of pay according to many studies and the general public Luxembourg has a minimum wage €9.08 per hour which is £8.26 per hour, or £17,173 a year. France has a minimum wage of €8.71 per hour (£7.92 per hour) and Ireland has a minimum wage of €8.65 per hour (£7.87 per hour). So a minimum wage of £7.45 per hour is hardly radical.

The current strategy of reducing child poverty heavily relies on increasing the amount of child benefits paid out, in real terms, relative to the median wage and inflation. This further and further incentivizes couples and women to have children simply in order to receive state benefits. This increases the number of children born into low income households, uses up government revenue and creates a benefits culture and destroys social cohesion.

A better way of reducing child poverty would be to create a living wage, so that the parent or parents as well as adults without children, become wealthier down to their hard work, and not simply for having children. The extra money coming in from a living wage, would lift lots of children out of poverty. Since this would help to stop or reverse the trend of parents simply having children to receive benefits, it would lead to less children being conceived for those reasons, and lead to less, large families on low incomes, leading to less expenditure and less spread of wealth amongst larger numbers of children for low income families, as there would be fewer children being born in low income families.

A living wage would benefit the economy because the poorest are the most likely to spend any extra money available to them. Most of the extra money available as a result of a living wage would get spent back into the economy, and particularly benefit local SMEs. Some of the lost government revenue from the SME corporation tax cuts would be made back through increased consumer spending by those on the living wage. An increase in the top rate of tax could also bring back some of the lost government revenue.

It would also create social cohesion and local economic regeneration by incentivizing the unemployed to seek work and reducing long term unemployment and people having children just for benefits, and the social problems that come with that. It would benefit local business through increased consumer spending and improve the general wellbeing of workers and the children of workers and give workers more reason and stamina to stay in work and off benefits. All of these phenomena would also increase government revenue to spend on healthcare and education, as less money would be spent on unemployment benefits, amending social problems and fighting crime, and more revenue would arise from increased consumer spending in local businesses and a larger workforce.