Minimum wage - what is the cost?

06 May 2016 7:06 PM | John Heap (Administrator)

In the UK, as in quite a few other countries, there is a minimum wage set by government.  In  the UK, this has recently risen fuelled by the introduction of what is called the National Living Wage.


(We will ignore, for now, any discussion on whether this means it was impossible to live on the previous minimum wage.)


 The use of these legal impositions on wage rates suggests a low wage economy - and in many sectors - social care, retail, as two examples, this is true.


The problem with low wage economies is that they mitigate against increased productivuty.


Real productivity gains often arise from the substitution of labour by capital - taking away inefficient manual work or assisting it with technology.  In a low wage economy, there is little incentive for firms to make such investments. Why take the risk?


This os one reason why countries like the UK are finding it so hard to climb out of the great economic depression.


Contact us

Address: 3rd Floor, Telegraph House,  80 Cleethorpe Road, Grimsby, DN31 3EF 

Phone:    +44 1472 358195

Email:     Info@instituteofproductivity.com

                     Privacy Policy

Powered by Wild Apricot Membership Software