The first national minimum wage was implemented in New Zealand in 1894. It was intended to protect the rights of workers and give them fair pay for the work that they do. This move has since been followed by a majority of countries around the world however, there are certain notable exceptions. These include Norway, Finland, Iceland, and Italy. In these countries, minimum wages are, more often than not, set de facto by individual industries. Put simply, workers in each industry negotiate with their employers for a minimum wage, which is then adopted across that particular industry. In other countries, minimum wages are often set by the government on an individual basis for industries. In recent years, the minimum wage in the United Kingdom has come to the forefront with some arguing that it can no longer support workers. The result of their campaigning was the creation of the campaign for a living wage to account for the discrepancy between the minimum wage and living costs with lots of companies electing to pay their staff the living wage. The debate about increasing the minimum wage has been ongoing since its introduction in the U.K. in 1998 and there are many strong arguments on both sides. 

For companies, increasing the minimum wage would have profound effects. For one, they would be inclined to hire fewer lower-paid workers as each worker would have to be paid more. As well as hiring fewer workers, companies will be inclined to increase the number of hours that each worker works to achieve the same levels of productivity with fewer people. For example, take this hypothetical warehouse where there are five-hundred workers, each paid a minimum wage of £9.50 per hour and working nine hours a day. The warehouse would spend £42,750 a day on the wages of its staff. Now, imagine that the minimum wage is raised to the same level as the national living wage: £10.42 per hour. Assuming that both the number of workers and length of work days remains unchanged, this would mean that our hypothetical warehouse would now have to spend £46,890 a day on the wages of its staff. So now, the warehouse would be paying its staff £4,140 more a day than previously for the same work completed. Some may argue that increasing the wages of workers would increase their productivity. However, this is not always the case. For example, in 2022, productivity in the United States decreased by, at its lowest point, three per cent from the final quarter of 2021 (when measured relative to 2012 levels of productivity). Despite sustained wage growth during this period. Coming back to our warehouse, this would mean that more money would be paid for the same, or even less, work. Our warehouse would be making less profit because its output would remain the same while its costs would increase by around nine and a half per cent. This leaves its managers with a choice; they could either lay-off some of their workers resulting in unemployment, or they would have to find other ways cope with higher costs of running a warehouse in which each worker is paid more. In the long run, this is unsustainable, especially in rougher patches, as it would make it tougher for the warehouse owners to cope with fluctuations in their other costs. 

As well as having higher costs, companies would also have to change the way in which they recruit and train. This is because there would be less wage differentiation at the lower end. A small difference-often one pound or less per hour-in the wages offered makes a significant difference when choosing an employer. Raising the minimum wage would mean that there would be less differentiation between salaries offered for low-skill work by employers. This would mean that employers would have to find other ways to differentiate themselves. This could mean offering their employees other benefits such as a better pension plan, free coffee at work, or more paid time off. Additionally, this would probably mean that wages rise for most workers in order to differentiate more between positions.  

Raising the minimum wage will make the U.K. a more attractive place to work. This is especially important at a time when there are over 1.1 million job vacancies in the U.K. with the majority of these being for low-skilled work. If the minimum wage were to be raised to a level above that of other major European countries, it would attract low-skilled workers to the U.K. However, since Brexit, the U.K. will struggle to make itself more attractive for workers from within the European Union because it will be significantly harder for them to move here when compared to other major European economies such as France and Germany. 

Raising the minimum wage would also give the lowest-paid workers greater spending power. Meaning that the lowest-paid workers would have a greater ability to cope with inflation (both now and in the future) as well as crises such as the COVID-19 pandemic and would make them less reliant on government support. Additionally, tax revenue to the government would increase because more people would be earning more money. 

Raising the minimum wage would have profound effects on the whole of the U.K. economy, both for companies and consumers. However, I do not think that there are significant benefits for the U.K. economy as a whole that would justify the move. For companies would have to pay a significant amount more money to their workers while productivity remains the same. They could then either lay off their staff which causes unemployment, or they would have to cope with higher costs by other means. Smaller businesses would be disproportionately affected, many of whom are already struggling in the wake of the pandemic and war in Ukraine because they have less money to spend on the salaries of their staff. However, there are also convincing arguments for increasing the minimum wage such as it leading to the reduction of government support in the future as well as making the U.K. a more attractive place for low-skilled work.