With the new proposal of increasing the minimum wage from £4.85 to £5.30, the Trade Union Council are aiming to reduce poverty levels and to have less people relying upon state benefits which are a potential advantage economically. However poverty is usually found where people are not in any current employment so raising the minimum wage is not necessarily going to minimise the problem as it will not directly affect them. But according to the general secretary of Usdaw, John Hannett (2004) says it “has made a valuable contribution to combating low pay levels.” So although it may not directly affect poverty it has improved the standard of living and has reduced people with low pay levels. Low skilled workers will not benefit from the increase in minimum wage as employers will opt to hire more experienced staff in order to get maximum productivity from their workforce and mainly because hiring inexperienced workers would mean more increasing costs for the business as they would need training. Another problem with increasing the national minimum wages is that employees may want to maintain their pay differentials. This is known as “pay leap-frogging.” This currently occurs due to the inequality of men and women. If employees were not able to keep their pay differential they may seek employment elsewhere and which may possibly force the company to comply and offer the wage they want, especially in specialised industries. A higher national minimum wage will not take into account the geographical differences of each region and it is said that employers should pay for a fair days work so the possible solution would be to instead of increasing the national minimum wage, it would be reasonable to suggest that setting a national minimum income would reduce poverty and in the population offer a more equal distribution in income. So although increasing the national minimum will increase production costs for businesses, this is only in the short run as in the long term businesses can benefit from lower labour turnover, increase in productivity and reduction in people absent which for small businesses is very expensive.
According to Ashley Seagar (The Guardian, 2004), “the length of the average working week in Britain has fallen to an all time low.” However the Trade Union Congress (TUC) has said although the number of hours working for each worker is decreasing, it is not decreasing fast enough. The average working hours for full time employment is 37.1 and for all occupations in Britain the average is 31.8 but men are still working longer hours in a week than women, 39.0 and 33.6 respectively.
When the working time regulations were introduced in 1998 as part of the working time directive, the European Commission (EU) rules state that no worker should work more than 48 hours. This is an average which is calculated over a period of 17 weeks, this includes overtime but not holidays, maternity leave etc. In Britain, however, they are the only member of state to have an opt-out which means workers can choose to work longer. This was to minimise the impact of enforcing the WTR on the economy. The main reason the EU have introduced the maximum working hours in a week is mainly health related. If employees are under pressure to complete their workload, they may have to extend their working hours to have it completed which increases the stress levels of the workers. This can result in demoralised workers and the need to take sick leave to recover, increasing the labour turnover and loss of production. This has a great impact on the economy because it can cost billions covering the costs of demoralised and sick employees. If workers have a limit to what they can work, it could benefit the firms by improving productivity and overall better health of the workforce as they won’t suffer from fatigue or stress.
When working long hours, they are more likely to suffer from fatigue and stress. Fatigue would increase the likeliness of accidents occurring in the workforce, putting everyone at risk and not just the company, for example if an aircraft was not constructed properly then anyone that enters or flies the aircraft is at risk. The main reasons people work extra hours are for overtime and to manage their workloads but if asked they would like to work shorter hours however some say they need or want to work extra hours.
Both the minimum wage and the average working week are intertwined. If a higher wage was offered then people could work fewer hours if wished, this reduces stress, improves the health of the worker and the state of the company. Offering a higher wage rate might mean that it is an incentive for the workers to put in more hours to improve their overall income which is an improvement for low paid workers. Companies may seek other options to minimise costs for example replacing employees with machines leading to an increase in employment. Also with a reduction in the working week and the increase in the minimum wage, it will be an incentive to improve productivity of the company in order to get the job done quickly and efficiently, this would reduce the cost of paying workers overtime and so not increasing production costs. Depending on each individual worker will determine the extent of the effects increasing the minimum wage and reducing the working week will have.
