Supplementing The Minimum Wage

Posted on: 14/08/2013

Both the US and the UK have reported falling unemployment in the last couple of years.

Some have regarded this as a miracle, given the low GDP growth in both countries and the rising unemployment experienced in the likes of Spain and Portugal.

There has been no need for miraculous intervention, however. The improving performance has been largely down to Government intervention.

Both Administrations pay supplementary benefits / food stamps to those earning below a living wage. This allows Retailers and Fast Food restaurants to pay low wages, helping to increase the profitability of the businesses.

In the UK, the Government has further assisted wage control by allowing Zero Hour Contracts and imposing wage freezes on millions of public service workers.

Average real wages have declined over 5% in the last three years. This has encouraged some employers to recruit staff rather than making capital investment in equipment.

If there has been any "miracle", it has been the success of the current Government in blaming the previous incumbents for the woes and persuading the public that it is acceptable to become poorer.

However, UK unemployment still just about hits 8%, so there is no room for complacency.

If the Government could persuade UK employers to favour Brits over Guest Workers, the position could be further improved. Don't hold your breath for that though. As we know from the Corporation Tax debate, big companies tend to be a law unto themselves.

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