Minimum Wages Increase

Minimum Wage Increases

The minimum wage increases announced in April have finally taken into effect as we have reached the comencement of October. These new hourly rates mean that those on apprenticeship schemes will receive an extra 3p an hour taking their total to £2.68. Those aged 16-18 will receive an extra 4p an hour at a rate of £3.72. People aged 18-21 will receive an extra 5p an hour now earning at a rate of £5.03. Finally, those aged 21 and over should count themselves lucky with a 12p increase taking their rate to £6.31 an hour... or should they?

 

An estimate of 890,000 are expected to receive some sort of pay rise in this last quartile of the year but with living costs greatening by the day and inflation increasing at an unwelcoming pace, are the working class actually gaining more disposable income? A think tank callled 'The Resolution Foundation' focus on trying to identify the best methods to improve standards of living. They have recently released a statement saying that the rise in minimum wage is actually failing the people of this country as it still bears minimal in proportion to the rates of inflation.

 

To put it into context, wages have only risen by 1%, in comparison, prices of goods has risen by a whopping 2.7%. Surely the government have some moral values; it is a breach of human rights to allow individuals to work endlessly just to be in debt to the banks who too are increasing interest rates. If the economic state of our country continues to follow this pattern, less consumption is going to be made by households. This drop in injection will weaken the circular flow of income as less of the goods produced by firms will be bought. Banks are then likely to make more savings with retained profits which may trigger a paradox of thrift as household income will drop due to lack of investment and consumers will lose confidence in spending.

 

Is a second recession in four years about to befall? I hope not.