Over the last decade or so, the minimum wage in Britain has been increasing as a measure to try and combat the cost of living crisis for Britain's most vulnerable workers. Of course, getting by on a minimum wage is still a very difficult task and the resurgence of food banks only reiterates the current state of affairs in this country. However, there is absolutely no evidence to suggest raising the minimum wage - or indeed having a minimum wage - will provide a springboard for people to escape poverty and the cost of living crisis. Let me explain:
1) It is a basic economic principle that workers and their pay are deduced by supply and demand. If there is a demand for workers, employers will have to offer a higher salary to fill the vacancy out of necessity. Similarly, if there is a shortage of supply for workers, employers will have to offer a higher salary to attract workers to the profession. In the case for jobs pertinent to the minimum wage, there is often a lack of demand and a surplus of supply; so to artificially increase the wages for these workers, you are distorting the mechanisms of market economics which in itself has immediate and long-term consequences.
2) If you increase the minimum wage, it is employers who will have to bear the burden of government intervention. Consequently, profit margins will decrease and this will force employers to invest in alternative technologies to reduce overall operating costs, such as automated checkout machines to replace checkout assistants or robotised computer algorithms to replace call-centre operatives. Employees are often the largest expense for businesses, and that expense increases, employers will look for alternatives which will result in unemployment and redundancy.
3) Even if workers are not replaced by robotics, employers might be forced to reduce bureaucracy or cut down on employees' hours. This might include changing workers from full-time to part-time contracts, abolishing middle-management positions or outright sacking employees because their services are no longer need as the business is forced to rework its business-model.
Before I go on and on, I think this video perfectly summarises the points made:
[video="youtube;HwcHRyvrNCE"]https://www.youtube.com/watch?v=HwcHRyvrNCE[/video]
Let me know your thoughts!