With an election looking more likely, Sajid Javid has announced another increase in Britain's minimum wage. How high can the minimum wage go before it hurts workers and firms? Our story from earlier this year
: On September 30th the newish chancellor of the exchequer, Sajid Javid, said that he planned to raise Britain’s hourly minimum wage to £10.50, or two-thirds of median earnings, within five years. As we wrote earlier this year, Britain already has one of the world’s highest pay floorshas gone minimum-wage mad. Left-wing Democrats in America support the “fight for $15” movement, whose goal is to double the federal wage floor.
Yet these fears have not come to pass. Even as the rate for the over-25s has risen from 45% of median earnings in 1999 to what will soon be 59%, unemployment has fallen. At 3.9%, it is at its lowest in more than 40 years. The employment rate among working-age people, meanwhile, is at an all-time high. The gains for those at the bottom of the labour market have been real.
How high can it go before the prophecies of doom made in the 1990s come true? It is a theoretical certainty that the employment costs associated with an ever-higher minimum wage will at some point become too much for firms to bear. Already there are signs that companies in labour-intensive industries, such as hairdressing and hospitality, have responded by raising their prices.
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