Population Matters

The UK’s new national living wage

The UK’s new national living wage

woman_workingPopulation Matters welcomes the national living wage that came into force today with open arms. We do not see it only as a positive step towards reducing inequality and improving living standards, but also as a necessary move towards a sustainable society; a society which can rely on a smaller workforce.

The UK is an ageing society. As longevity increases, the fear grows that the UK might in the long term not have a sufficiently large workforce to provide for society’s dependents. Consequently, some argue that we should welcome population growth. We, however, believe that the living wage has the potential to demonstrate to sceptics that Britain would function perfectly well with a falling population.

As Vicky Price, chief economic advisor of the Centre for Economics and Business Research, notes: “In the longer term, higher wages…encourage greater productivity in the service sector, which is generally less productive per worker/hour than manufacturing and where most of the effect of the living wage will be felt. That will be good for the economy overall.”

Greater productivity means that fewer employees will be required to keep the economy going. Thus, as society grows older, we will need neither to improve our birth rate nor to attract migrants to fill anticipated gaps in the workforce. Prominent politicians such as culture minister John Whittingdale have, however, expressed the fear that a higher national minimum wage will serve as a migrant magnet. We believe that the change could actually give UK residents a comparative advantage. A higher obligatory minimum wage will make it less beneficial for employers to hire cheap, skilled migrants. That will encourage companies to look for qualified UK residents instead, thereby improving their chances of reasonably-paid employment.

Population Matters sees many social benefits in a smaller population. Not only would the strain on existing public goods be relieved and the expense of the Treasury lowered, a smaller population size would also improve the well-being of the UK’s population. Today’s national minimum wage raise from £6.70 an hour to £7.20 can thus be seen as a positive first step towards a future society in which all thrive.

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