Why the Minimum Wage increase is a very bad idea

Why the National Minimum Wage increase in April 2025’s budget is a very bad idea

How can I make that argument? What sort of buffoon would suggest a minimum wage increase is a bad idea? The UK is seeing many people on lower incomes struggling. So how can this be a bad thing?

The real reason why the increase is happening

The government have a £22 billion deficit in their finances. To put it another way the amount coming in to the governments bank account is £22 billion less than what is going out. Therefore they need to fix that.

The governments source of income is mostly from taxes. Therefore by increasing taxes you can increase the income by £22 billion and close the gap.

Where are the government increasing taxes

The government are increasing taxes through several means and these play into why increasing the national minimum wage is such a bad idea.

National minimum wage – from April 2025 this is increasing from £11.44 per hour for over 21 age groups to £12.21 per hour. This was already increased in April 2024 from £10.42 to £11.44. Therefore in just over a 12 month period national minimum wage will have increased by nearly 20%.

Minimum wage for under 21 age groups is also increasing. National insurance contributions from employers only is increasing by 2%. Then there are changes to Capital Gains tax – this is the money an individual can make from selling a business or asset. And not to mention inheritance tax – this is the amount someone is worth upon death that they leave to their family.

How does this mean that the National Minimum Wage increase is going to be a bad idea then

As an employee on minimum wage the sales pitch from the government to you is that you will earn more for doing the same job. Happy days. But that sales pitch forgets to give you the bigger picture and how that will actually affect you.

Minimum wage in many industries is common place because the companies in those industries don’t often make that much money. In fact do not be surprised if the company you work for barely breaks even. The government won’t tell you that. The narrative from media and gossip is that businesses make loads of money, but most businesses do not. 90% of the companies in the UK make a small profit, break even or make a loss. Only 10% of businesses actually make proper money. Look it up if you don’t believe me.

With this in mind, put yourself in an employers shoe’s who breaks even and employs lots of minimum wage employees. By April 2025 they will have had to increase pay by nearly 20% for those minimum wage earners plus pay 2% more on National Insurance contributions. Then after years of toil if they manage to be one of the lucky few owners making it to the 10% of companies that do make real money, the government want to tax you even more if you wish to sell it. And finally upon your death your family get even less money because the government want some of that too.

The Result

Here is the reality of this short sighted government fix. Employers who employ lots of minimum wage employees will be forced to do one of 3 things. 1-Stop hiring – making it harder for you to get a job. 2-Let people go – giving you even more competition to find a job. 3-Put their prices up which if unsuccessful will land out of a job and if successful will cause inflation which will negate the benefit of the minimum wage increase in the first place.

Add to this, the people who have the money to employ people, know how to create jobs and have the ability to help the countries economy will leave the UK because what is the point? This is happening already and the media paint this as rich spongers leaving. In reality that’s the money going that could create jobs for you to earn.

I could go on about the solutions as there are a number, but they involve using the carrot and the stick to increase government income, rather than just a big dirty stick.

Find out how we can help you.

Get in touch with us today.

Find out how we can help you.

Get in touch with us today.