The national minimum wage (NMW) has been in place in the UK since its introduction by the Labour government in 1999. The NMW established a legal floor to the wage per hour that employers could pay their workers. A pressure group (the Living Wage Foundation) argued that the level at which the NMW was set was not sufficiently high to offer protection for workers given the cost of living. The foundation proposed a higher rate that would enable low-paid workers to earn a sufficient wage. In the Budget of 2015, George Osborne announced that the ‘living wage’ was to be adopted for workers aged 25 and over. This was partly in recognition of the fact that more people in the UK were in low-paid jobs than in other developed countries.
From April 2016, the national minimum wage (NMW) was replaced by the national living wage for workers aged 25 and above, paid at a higher rate than the NMW (which remained in place for younger workers). Evaluate the microeconomic impact of this policy change.
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