What is the relationship between minimum wage and relative poverty in the UK?

In the UK, a higher minimum wage can potentially reduce relative poverty, but the relationship is complex and multifaceted.

The minimum wage is a legal requirement that employers must pay their workers a certain hourly rate. In the UK, this is set by the government and varies depending on the worker's age and whether they are an apprentice. The idea behind the minimum wage is to ensure that workers earn enough to cover their basic needs and live above the poverty line. Relative poverty, on the other hand, is defined as earning less than 60% of the median income. Therefore, if the minimum wage is set above this threshold, it could theoretically reduce relative poverty.

However, the relationship between minimum wage and relative poverty is not straightforward. Firstly, not all low-paid workers live in poor households. Some may be secondary earners in higher-income households, so raising the minimum wage might not necessarily reduce relative poverty. Secondly, if the minimum wage is set too high, it could lead to job losses as employers may not be able to afford to pay their workers. This could potentially increase poverty.

Moreover, the impact of the minimum wage on relative poverty also depends on the wider economic context. For instance, if inflation is high, the real value of the minimum wage could be eroded, meaning that workers are still left in relative poverty. Similarly, if the median income is rising rapidly, the relative poverty line could also be increasing, making it harder for minimum wage workers to escape poverty.

Finally, the minimum wage is just one tool in the fight against poverty. Other measures, such as tax credits, benefits, and access to affordable housing and childcare, also play a crucial role. Therefore, while a higher minimum wage can potentially reduce relative poverty, it is not a silver bullet and needs to be part of a broader strategy to tackle poverty in the UK.