Minimum wage has become the only wage

 The news is full of NEET unemployment. That refers to that there are nearly 1 million 16 to 24 year olds who are unemployed, not in training or working in any way.  There are about 7 million 16 to 24 year olds so that means 14% are economically inactive and will in all probability never be economically active.

If you look around Europe, the two major economies propping up Europe are France and Germany.  They are both in trouble. France for it's lack of budget control and Germany because of high energy prices making it hard to compete with the Chinese who are eating their lunch.  Both are largely socialist economies.

The UK's minimum wage is currently £12.71 per hour (EU14.70/hr) and will increase to £13.45 .  Compare that with France EU12.02/hr and Germany EU13.90/hr.

Meanwhile the Spanish economy is booming.  Their minimum wage is  just EU8.20.

It has become very expensive to employ people in the UK. And certainly employers dont see the point in hiring inexperienced NEETs when they can employer experienced staff for the same minimum wage.

When the minimum wage was introduced into the UK in 1999 it was £3.60 per hour.  Had that simply kept pace with inflation it would have risen to £8.50 whereas it is now £12.71. When it was introduced it was set at around 45% of median earnings.  It would be similar to the Spanish minimum wage had it simply tracked inflation.

The minimum wage is supposed to be "arms length" from government. The Low Pay Commission sets the minimum wage and the government always accepts the recommendation. The reality is the government does interfere. They set the policy that the median wage should be 67% of median earnings not 45% of median earnings. That means the minimum wage has grown faster than inflation. 

This has removed the classic bell curve distribution of wages and skewed it so that a large chunk of the working population now earn the same wage. 

The median wage based on £12.71 minimum wage is therefore a median wage of £18.97/hr and with the April 27 increase to £13.45 means the median is £20.07/hr.

At £13.45 per hour it means that the salary for someone on minimum wage working full time is £27,976 per year. Considering the 40% tax rate starts at £50,271 - with the government generously increasing minimum wage by 5% each year and with the tax bands frozen until 2030, minimum wage will have increased to £32,385 by 2030 - not massively different to £50,271 !

This increase from to £13.45 is a 5.8% increase - significantly more than the 3.5% inflation rate.  Governments like to abuse increases to minimum wage since it does not cost them anything - employers have to foot the bill.  Governments are not impartial - increasing minimum wages increases taxes - particularly with frozen thresholds it raises yet more taxes! 

The increase from £12.71 to £13.45 means the salary increases by £1,538 resulting in the employee paying an extra £307.60 in tax.  Rachel's employer tax means the employer has to pay another £230.70 in National Insurance tax for the privilege of employing someone. 

So with a salary of £27,976 employers also have to pay   Rachel's job's tax means employers have to pay £3446.40 National Insurance, £839.28 pension contributions and 5.6 weeks paid holiday which means the hourly cost of an employee on minimum wage for the 1856 hours worked per year is £17.38 per hour.  The cost of employing someone has become a huge burden for employers - and that's assuming they work and don't go off sick.

With such a high minimum wage, it  causes employers problems.  It eliminates aspiration.  When a manager earns maybe £1/hr more than the minimum wage why would anyone take the job when then can have an easier life not being a manager?

So back to this inflation busting 5.8% increase in minimum wage.  What is driving this? 

Pay rises in the public sector not the private sector are really what's behind this number.

Public-sector regular pay growth is running at 6.1%  whilst Private-sector regular pay growth is  2.8% over the last year. 

If you strip out the forced increase resulting from the minimum wage growth in the private sector, the real underlying wage growth in the private sector is about 1.9% - far below inflation.

The cost of these inflation busting pay rises in the PUBLIC sector of 6.1% is the basis for the minimum wage and unfortunately private sector employers are being forced to pay this. Basically every time the minimum wage is increased it is compressing the salary ranges for more skilled roles. Eventually there will be no difference between skilled roles and starters on minimum wage with zero experience.

Welcome to communism. Brain surgeons should be paid the same as dust men according to socialists.