Minimum wage hikes would boost US and UK economies, says research Minimum wage hikes would boost US and UK economies, says research

Minimum wage hikes would boost US and UK economies, says research
17 Sep 2018

Rises in the minimum wage could provide a significant boost to both the US and UK economies, according to two major studies.

Research by UK left-wing think tank the Smith Institute found that even a small hike in hourly wage rates would encourage employers to deploy staff more productively and help tackle the country’s ongoing problem of low productivity, thereby helping to increase GDP by more than £1bn (US$1.29bn).

As a result, the study suggests that the UK Government should increase the minimum wage from £7.38 (US$9.62) an hour, or £7.83 (US$10.21) for over-25s, to voluntary living wage levels. The living wage, promoted by the Living Wage Foundation, recommends employees should receive at least £10.20 (US$13.30) an hour in London and £8.75 (US$11.40) across the rest of the UK.

Smith Institute deputy director Paul Hunter, told UK Investor magazine: “Big employers often like to talk about the positive role they play in their local community. One way that they can go beyond the warm words is to pay their staff the living wage and demand their suppliers do the same.”

Another study on the other side of the Atlantic also reached a similar conclusion. Research published in March by the US Census Bureau found that increasing the minimum wage boosts earnings growth over the long-term, without parallel declines in employment.

Economists Kevin Rinz and John Voorheis stated in their working paper ‘The Distributional Effects of Minimum Wages’, that improving basic incomes by 37% in the years leading up to the Great Recession would have slowed the rate of income inequality that has deepened in the US over the last 45 years.

According to Business Insider, Rinz and Voorheis linked data obtained from the Social Security Administration with that from the Current Population Survey. Based on information from people aged 16-64, for the years 1991, 1994 and 1996 until 2013, their findings also included work carried out by University of Massachusetts Amherst economist, Arindrajit Dube.

Gill Oliver

Gill Oliver is a business and property journalist who has written for The Daily Mail/Mail Online's This is Money, The Press Association and many national and regional newspapers and magazines.

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Rises in the minimum wage could provide a significant boost to both the US and UK economies, according to two major studies.

Research by UK left-wing think tank the Smith Institute found that even a small hike in hourly wage rates would encourage employers to deploy staff more productively and help tackle the country’s ongoing problem of low productivity, thereby helping to increase GDP by more than £1bn (US$1.29bn).

As a result, the study suggests that the UK Government should increase the minimum wage from £7.38 (US$9.62) an hour, or £7.83 (US$10.21) for over-25s, to voluntary living wage levels. The living wage, promoted by the Living Wage Foundation, recommends employees should receive at least £10.20 (US$13.30) an hour in London and £8.75 (US$11.40) across the rest of the UK.

Smith Institute deputy director Paul Hunter, told UK Investor magazine: “Big employers often like to talk about the positive role they play in their local community. One way that they can go beyond the warm words is to pay their staff the living wage and demand their suppliers do the same.”

Another study on the other side of the Atlantic also reached a similar conclusion. Research published in March by the US Census Bureau found that increasing the minimum wage boosts earnings growth over the long-term, without parallel declines in employment.

Economists Kevin Rinz and John Voorheis stated in their working paper ‘The Distributional Effects of Minimum Wages’, that improving basic incomes by 37% in the years leading up to the Great Recession would have slowed the rate of income inequality that has deepened in the US over the last 45 years.

According to Business Insider, Rinz and Voorheis linked data obtained from the Social Security Administration with that from the Current Population Survey. Based on information from people aged 16-64, for the years 1991, 1994 and 1996 until 2013, their findings also included work carried out by University of Massachusetts Amherst economist, Arindrajit Dube.

Gill Oliver

Gill Oliver is a business and property journalist who has written for The Daily Mail/Mail Online's This is Money, The Press Association and many national and regional newspapers and magazines.

OTHER ARTICLES THAT MAY INTEREST YOU

British 18-24 year olds receive biggest minimum wage hike in a decade

Sleep-in shift workers not entitled to minimum wage, rules UK appeals court

UK employers owe workers £1.44m in minimum wage violations

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