There has been a strong campaign to raise the minimum amount employers can pay their workers to the Living Wage Foundation’s independently calculated “real living wage” of £9.90 and £11.05 in London, but some are saying that is still not enough.
The national living wage – the legal minimum for those aged 23 and above – is set to go up to £10.42 an hour this April, however the national minimum wage is lower, at £10.18 per hour for those aged 21 or 22, and even less if you’re younger or an apprentice.
Unions are leading the way in demanding the government find ways to boost the economy, with many throwing their weight behind the campaign for a £15 minimum wage.
But is it economically feasible? We spoke to the experts on how a £15 minimum wage would work and what impact it could have on working people.
Who is calling for a £15 minimum wage?
The UK has seen a wave of strike action among public sector and low paid workers, with many who have long received the government’s minimum wage saying that it is no longer enough.
Amazon workers, represented by union GMB, are poised to strike this year demanding pay of £15 an hour, as are railway cleaners, represented by the RMT, who also want a £15 hourly rate plus sick pay, better holidays and pensions.
“Frankly, I don’t think £15 is a lot to ask for the people who quite often are doing some of the most difficult jobs in our economy”, the new head of the Trades Union Congress Paul Nowak told The Mirror.
“Whether that’s working in care homes, or serving us our meals and working in the hospitality industry or cleaning.
“I think it’s the bare minimum that people need to have a decent standard of living and we shouldn’t be ashamed for asking for it.”
To get to a £15 minimum wage, hourly median pay would need to rise from its current rate of £14.85 to approximately £20 an hour. This would see the minimum wage rise at a rate on par with average wages, making sure that those earning the least don’t fall too far behind.
Would Labour bring in a £15 minimum wage if it was in government?
Last year, union Unite put forward a composite motion to be debated at the Labour Party Conference, which, among other motions such as banning fire and rehire, calls for the minimum wage to increase to £15 per hour. It was passed unanimously.
The wide-ranging motion also demanded stronger union rights, higher taxes “on the very wealthiest”, an end to zero-hour contracts and a “better work-life balance”.
The £15 minimum wage section of the motion was submitted by the Bakers, Food and Allied Workers Union, and adopted by grassroots group Momentum into its eight proposals for the September conference. Former leader Jeremy Corbyn has also told the BBC that a £15 an hour minimum wage is something the party “should be supporting and campaigning for”.
Why are there calls for a £15 minimum wage?
Increasing the minimum wage to £15 an hour would lift huge numbers of working people out of poverty, remove the burden of welfare from the taxpayer and create an environment for small businesses to thrive, according to grassroots movement Labour movement Momentum who are supporting the motion.
Research published by the TUC and the High Pay Centre showed that the salaries of FTSE 100 chief executives had increased by almost 40 per cent in the last year, while many workers fight for pay to keep up with inflation.
The researchers found that a £15 minimum wage would save the government £4.2bn on benefits payments that top up the wages of people on low-incomes, allowing it to cut taxes on small businesses, and raise an extra £30bn in taxes.
They argue that by lowering National Insurance Contributions for small businesses, the government would reduce their tax burden and compensate for the increase to the cost of wages. For larger businesses, they said “there is significant ‘slack’ available on their balance sheets to absorb increased labour costs.”
Co-author of the PEF’s report making the case for a £15 minimum wage, James Meadway, said that a £15 minimum wage by 2024 would make up for a “lost decade” of stagnating wages.
He also positioned the policy as a way to “Level Up” the north of England, which would boost the incomes of 51 per cent of employees in the area, compared to 33 per cent of workers in London. Across the country, 14 million people would see their pay increase under the proposals.
What impact would a £15 minimum wage have on jobs?
Given that more than half of the entire workforce of the UK earns less than £15 per hour at present, some have asked whether a £15 minimum wage would be fair.
The minimum wage is currently around 63 per cent of average hourly pay. In its plan for a £15 minimum wage, the TUC is calling for this “bite” point to be increased to 75 per cent.
There are two key concerns for raising the minimum wage to such levels, Alan Manning, professor of economics at LSE, told The Big Issue.
“If we had £15 today, it would be so far out of any experience that the UK or any other country has had, it would be hard to say what the impact would be. But the concern would be that lots of businesses would find they can’t afford to pay that,” he said.
If employers are unable to pay wages at the level mandated by the government, they will have to employ fewer staff, leading to redundancies or a halt in hiring new workers.
Manning points to the 10 per cent rise to the national living wage in April, which is roughly in line with inflation.
“A rise of the minimum wage to £15 would be a 50 per cent increase, so that’s far in excess of rising prices,” he continued, and would put a strain on businesses already grappling with other rising costs.
Secondly, Manning says it could impact on motivations to get jobs which require higher levels of training, skill or stress.
“Fifteen pounds an hour is probably more than what many nurses are paid, and they’ve gone through three years of training. If you suddenly say that any job pays £15 an hour, why is anyone going to train as a nurse?” Manning asked.
“It’s risky in the sense that just because it sounds good, that doesn’t necessarily mean it’s going to be good in practice.”
When could we see a £15 minimum wage?
The TUC has said that a £15 minimum wage should be in place by at least 2030, but needs to be brought in “as soon as possible” if the government is serious about getting wages rising.
James Meadway, director of the PEF described the plans as going in the right direction but added that “£15/hour minimum by 2030 is too late for low paid workers, and they shouldn’t have to rely on future economic growth to achieve it”. The PEF argues that a £15 minimum wage would be affordable for the government to implement by 2024.
The next general election is set for May 2 2024, and since Labour would not be in a position to make changes to the national living wage until then, it would be from this point that a £15 minimum wage could, hypothetically, be on the cards.
“We will make an assessment of that, which I think is the responsible thing to do, closer to the general election” said Nick Thomas-Symonds, the shadow home secretary.
Ahead of the next general election, Labour would be willing to “make an assessment” of whether a £15 minimum wage is viable.
“As a fraction of average earnings, the UK’s minimum wage is one of the highest in the world”, he said. “The government has a target to make it two-thirds of average earnings, that is very high by historical standards and the standard of other countries.”
The national wage will eventually reach £15, says The Resolution Foundation, however it is not an “an economically viable policy in the short-to-medium term.”
If the national minimum wage were to increase yearly 4 per cent – a fairly typical rate of increase for the minimum wage – it would reach £15 per hour by the mid-2030s.
“We’re basically saying that £15 is unviable in the short-term, and inevitable in the long-term,” a spokesperson told The Big Issue.