In this episode, we'll explore the complex world of minimum wage laws, from their surprising origins in Australia and New Zealand to modern debates around their effectiveness.
Do they protect the lowest-paid workers, or do they do more damage than good?
[00:00:05] Hello, hello, hello, and welcome to English Learning for Curious Minds, by Leonardo English, the show where you can listen to fascinating stories and learn weird and wonderful things about the world at the same time as improving your English.
[00:00:20] I'm Alastair Budge, and today we are going to be talking about the minimum wage.
[00:00:27] In many countries around the world, there are laws stating the minimum amount of money that an employee should earn for doing a job, the so-called “minimum wage”.
[00:00:37] To some, this is a worthy achievement, a law that protects workers from exploitation at the hands of greedy corporations.
[00:00:47] To others, it is a red herring, a feel-good measure that hurts the very people it aims to help.
[00:00:55] So, in this episode, we’ll explore the history of the minimum wage, we’ll look at some of the arguments for and against, we’ll look at some examples of countries where it has worked, others where it hasn’t, we’ll talk about the particular case of the UK, and we’ll also learn about how sometimes not having a minimum wage, surprisingly enough, actually results in higher wages for the lowest paid workers.
[00:01:21] OK then, let’s get right into it, and talk about The Minimum Wage.
[00:01:29] I imagine that many of you can remember your first real paycheck.
[00:01:34] In the autumn, after I finished school, I worked in a pub in a nearby village, pulling pints, serving drinks and making small talk with the regulars.
[00:01:47] The shifts were quite long at times. 12 pm to 12 am was the longest one, if I’m not mistaken.
[00:01:55] Afterwards, I would go home on my bike, exhausted after 12 hours on my feet, serving drinkers who would sometimes get increasingly troublesome as the night went on.
[00:02:07] For my work, I was paid £4.25 every hour - the minimum wage in the UK at the time, or at least, the minimum wage for everyone under the age of 22.
[00:02:21] And for reference, this was in 2005, so it was about €6.
[00:02:28] It seemed like a lot to me. But I was living at home with my parents, I didn’t pay rent, and I didn’t pay for groceries. It seemed like a lot to a fresh-faced 18-year-old, but clearly, it wasn’t, at least not in the UK.
[00:02:46] It was the minimum that any company was legally allowed to pay an employee; I literally couldn’t have been paid any less.
[00:02:56] But of course, this idea, that the government should step in and set a legal minimum for how little someone can be paid, is a relatively new concept.
[00:03:08] For most of history, wages were determined by the market, or more accurately, by power.
[00:03:17] Whether you worked in the fields or later on in a factory, the amount you were paid was the result of a direct agreement between you and your employer.
[00:03:28] If you were desperate for work, and your employer knew it, they could pay you next to nothing.
[00:03:35] And they often did.
[00:03:37] Pick up any Charles Dickens novel and you’ll find depictions of evil employers squeezing their workers for every last penny, paying them the absolute minimum possible for them to not die of starvation or from freezing to death at home.
[00:03:55] And of course, the UK was not alone in this, in its basically “zero state intervention” policy in terms of the amount an employer needed to pay its employees.
[00:04:05] All over the world, workers typically had few protections, few safeguards ensuring that they were paid enough to live a decent life.
[00:04:17] And although it is now popular to talk about how we must crush the rich and how evil billionaires are exploiting the poor, the reality is that living standards and disposable income for the poorest in society, in practically every country in the world, have never been higher than they are today.
[00:04:38] This is thanks to economic growth, but there is an argument to be made that it is also thanks to the concept of the minimum wage. In other words, the lowest salaries in society are higher than ever before, thanks to government intervention, laws protecting workers from low pay.
[00:05:02] Governments first started to get involved at the end of the 19th century, and in fact, the first countries to legislate minimum wage laws were in a part of the world you might not necessarily expect: not post-revolutionary France or English factory workers weary of working 12 hours a day, 7 days a week.
[00:05:25] It was, in fact, on the other side of the world, in Australia and New Zealand.
[00:05:32] In both countries, there was growing concern that certain workers in certain industries, especially women working in clothes factories, were being paid so little that they couldn’t afford even the basic necessities of life.
[00:05:49] A small number of employers held all the power, and governments feared that unless something changed, there would be civil unrest, and they would have a French Revolution-type situation on their hands, with angry workers rising up against their rulers.
[00:06:08] The first laws came into place in 1894 in New Zealand, and in Australia two years later. Initially, they were focused on individual industries, but they quickly spread.
[00:06:23] The idea was codified by a 1907 law called The Harvester Case, which stated that there should be a 'living wage' for, and I’m quoting directly, a man, his wife, and three children to "live in frugal comfort".
[00:06:42] Frugal, by the way, means careful with money, so frugal comfort means living comfortably but without any luxuries.
[00:06:52] In other words, every job should pay enough to support a decent life for a family of five: a man, his wife, and three children.
[00:07:03] Now, perhaps you can complain about this seeming like an archaic view of the world, of a man going out to earn a living while his wife and three children stay at home. This was more than 100 years ago, so clearly, certain things were different.
[00:07:19] But what you might also quite rightly point out is that this “living wage” must surely have been more generous than a modern “living wage”, given that it aims to support one non-working parent and three children.
[00:07:36] In 21st-century Britain, at least, you would certainly struggle to support a family of five on the minimum wage.
[00:07:44] But back to the start of the 20th century.
[00:07:48] Understandably, the introduction of the minimum wage proved popular with workers, and the idea quickly spread.
[00:07:57] In 1909, the United Kingdom passed something called the Trade Boards Act, which established wage boards to set minimum wages in industries that were considered especially exploitative, things like garment work, where mainly women and children were exploited, forced to work long hours in terrible conditions for very low pay.
[00:08:21] In the United States, a national minimum wage came a little later, but not without a fight.
[00:08:29] It was introduced in 1938, during the Great Depression, as part of President Franklin D. Roosevelt’s New Deal.
[00:08:38] At the time, it was set at $0.25 an hour, around $5.70 in inflation-adjusted terms.
[00:08:47] Even though the idea had spread through much of Europe, it was still a radical idea in America.
[00:08:54] It was the biggest economy in the world, the roaring heart of capitalism, and the idea that the government should intervene and say “this is the minimum a company can pay its employees”, well, that was controversial.
[00:09:10] It would cost jobs, employers cried, it would result in people being paid less because companies would sack them. Companies would go out of business if they had to pay these higher wages.
[00:09:22] To this, President Franklin D. Roosevelt had a plain answer: tough luck.
[00:09:29] Or, as he put it, “ it seems to me to be equally plain that no business, which depends for existence on paying less than living wages to its workers, has any right to continue in this country."
[00:09:42] In other words, if you can’t pay a fair wage to your employees, you deserve to go out of business.
[00:09:50] Now, the minimum wage in the US today has not moved on much; the federal minimum wage is dismally low, at $7.25 an hour, but various states have different laws about what companies are required to pay their employees.
[00:10:07] Almost 100 years later, in the spiritual home of free-market capitalism, the debate about the minimum wage rages on.
[00:10:17] As it does, in fact, in every country that has legislated on the minimum wage, or where there are talks about changing or increasing it.
[00:10:26] Its supporters argue that it needs to be protected at all costs, created if it doesn’t exist already, or increased if it is considered too low.
[00:10:38] Without a fair minimum wage, the most vulnerable in society risk being even more exploited by powerful corporations.
[00:10:47] People would be at the mercy of employers who could pay as little as they liked, especially in industries where workers have very little bargaining power. A minimum wage ensures that there is at least a basic level of fairness, that no one working full-time should live in poverty.
[00:11:07] On the other hand, critics argue that setting a minimum wage could actually harm the very people it is designed to help.
[00:11:16] If you set the minimum wage too high, they argue, employers might respond by hiring fewer people, cutting hours, replacing workers with machines, or, of course, with AI.
[00:11:30] They say that it can lead to higher unemployment, especially among young people, those with lower levels of education, or those entering the job market for the first time.
[00:11:42] In other words, some people might be better off, those who keep their jobs and their same hours, but others will lose their jobs completely and be in a much worse economic position.
[00:11:56] And the arguments for and against the minimum wage go beyond ideas about how much money a worker will be paid.
[00:12:05] On the “pro minimum wage” side, supporters argue that it can also boost morale and productivity. When workers feel they are being treated fairly and paid a decent wage, they are more likely to take pride in their work, stay with their employer for longer, and to contribute more.
[00:12:24] This is good for them, good for their mental health, and it’s also good for the business, because it reduces turnover and increases productivity.
[00:12:35] Another argument in favour of the minimum wage is that it increases consumer spending.
[00:12:42] If low-wage workers have more money in their pockets, they are likely to spend it in their local communities, which helps stimulate the economy.
[00:12:52] The wealthier an individual is, the higher proportion of their income they save, so if a company pays low earners more, they will typically spend a greater percentage of what they make than what the wealthy company owners would spend.
[00:13:09] So, it’s a good thing for local and general economic growth.
[00:13:15] But there are also more arguments on the “anti-minimum wage” side.
[00:13:20] Firstly, the concern that it puts pressure on small businesses.
[00:13:26] A large multinational company might be able to absorb the higher wage costs, but for a small shop or restaurant operating on wafer-thin profit margins, it could mean the difference between staying open or shutting down.
[00:13:43] Some economists argue that a blanket minimum wage is a blunt tool, like trying to tend to a flowerbed with a lawnmower instead of precise little scissors.
[00:13:55] A blanket minimum wage treats every region and every industry the same, even though the cost of living and average wages vary hugely.
[00:14:07] In the UK, for example, the entire country is treated in the same way, it is a national minimum wage.
[00:14:14] As of April this year, it’s £12.21 an hour whether you live in central London or a remote village in the north of the country.
[00:14:24] And to state the obvious, like in almost every country, the cost of living varies a lot.
[00:14:31] What you can buy with £12.21 in London is very different from what you can buy with £12.21 in rural Wales or even a lower-cost-of-living city like Belfast or Newcastle.
[00:14:46] Yet the pay for a minimum wage worker is the same.
[00:14:52] This isn’t fair for workers, the argument goes, someone in London needs to be paid more, and someone in Newcastle doesn’t need to be paid as much.
[00:15:03] It also isn’t fair for businesses. A wage that is perfectly reasonable in high-cost central London might be completely unaffordable for a small business in a rural town.
[00:15:16] Now, I should add that some countries do legislate on the minimum wage at a more regional level, which evens out some of these disparities. In China, for example, the minimum wage in Beijing is almost 70% higher than it is in rural western China, which helps account for the different cost of living.
[00:15:39] There is also the argument that the minimum wage, if set too low, legitimises and encourages low pay.
[00:15:49] In the UK, many minimum wage workers are still forced to turn to the state for financial assistance. But because their employers have met their legal obligations, they can wash their hands of the situation, saying “we’re paying what we need to do”, rather than paying a fair and honest wage to their workers.
[00:16:12] And finally, there is also the argument that it does not necessarily target those who need help the most.
[00:16:20] In some cases, the person earning a minimum wage might be a student living at home, like I was, or a second earner in a well-off household.
[00:16:32] In other words, not everyone earning the minimum wage is living in poverty, and not everyone in poverty is earning the minimum wage.
[00:16:42] So, what would happen if there were no minimum wage?
[00:16:47] In theory, to the critics of the minimum wage at least, businesses and employees would be free to set their own wages. People in high-cost-of-living areas would be paid more, and people in lower-cost-of-living areas would be paid less.
[00:17:05] And this is not just theory. There are actually plenty of examples of countries without minimum wage laws, some where employees are paid much more than in countries which have minimum wages.
[00:17:19] Sweden, for example, has no minimum wage laws, yet it has one of the highest median wages in Europe. In fact, most Scandinavian countries, which tend to be at the top of every table with average wages and living standards, they don’t have national minimum wage laws.
[00:17:41] Now, this isn’t due to the great benevolence and kindness of Scandinavian employers, but rather that most jobs are covered by trade union agreements, so the union will negotiate wages on behalf of employees.
[00:17:58] These employees are highly protected in terms of what a company can pay them, the protection just comes from the trade union, not the state.
[00:18:07] The logic behind this is that wages are better determined by those who understand the specific needs of an industry, rather than by politicians, and, given the relatively high wages of the lowest-paid workers in Scandinavia, it’s hard to deny that it works pretty well.
[00:18:27] Now, the last thing I want to talk about today is the situation in the UK, because something interesting has been happening with the minimum wage.
[00:18:37] Ever since the national minimum wage was introduced by Tony Blair in 1999, it has continued to rise.
[00:18:45] It started at £3.60 an hour, and in April this year it was increased from £11.44 to £12.21 an hour.
[00:18:58] Compounded, this is an average growth of almost 5% a year, which is significantly higher than the growth in non-minimum wage jobs, which increased at a rate of 2.8% a year.
[00:19:12] So the minimum wage increased almost twice as much as the average salary, which has led to this slightly unusual situation in which the difference between minimum wage jobs and more skilled jobs has been massively reduced.
[00:19:31] For example, the salary for a graduate nuclear engineer in the UK starts at around £22,000 year, which is around €25,000.
[00:19:45] The minimum wage of £12.21 an hour, for someone working full-time, would result in a salary of £23,873 a year, more than a graduate nuclear engineer.
[00:20:00] Now, clearly, the nuclear engineer most likely has better career prospects; they can get promoted, paid more, and perhaps the work is more fulfilling than in many minimum-wage jobs.
[00:20:13] Perhaps you might even argue that this is the way it should be, that someone doing public service cleaning the streets in the rain should be paid just as much, more, even, than someone sitting behind a desk and answering emails.
[00:20:28] But there have been plenty of stories in the British press over the past few years of young people complaining about this situation, asking themselves why they should slave away at university for 3 or 4 years, getting into tens of thousands of pounds of debt only to get a job where they are paid the same as someone working in an unskilled, minimum wage job.
[00:20:53] “What’s the point of studying and working hard,” they ask, “if it isn’t going to result in any better financial situation?”
[00:21:02] To wrap things up, the minimum wage is one of those fascinating topics that divides people on both sides of the political spectrum.
[00:21:12] On the right, there are those who oppose it because they see it as excessive government intervention in the free market, something that distorts natural supply and demand and risks killing jobs. But there are also those on the right who support it as a way of reducing the need for government welfare, arguing that if people are paid more, they rely less on the state.
[00:21:36] On the left, there are those who support it because it protects vulnerable workers, reduces inequality, and ensures a basic level of dignity in work. But they have colleagues on the left who criticise it as a distraction, arguing that it doesn't go far enough, and that we should be talking instead about living wages, stronger unions, or even universal basic income.
[00:22:03] Indeed, when I was researching this episode and I wanted to double-check the date that Tony Blair’s government implemented the minimum wage, I googled “Tony Blair minimum wage”.
[00:22:16] The first two results I got were both from left-leaning publications: Jacobin and The Guardian.
[00:22:24] The first result read “Britain’s Minimum Wage Law Has Been an Abject Failure”.
[00:22:32] And the second read, “Minimum wage is UK’s ‘most successful economic policy in a generation’”.
[00:22:40] It just goes to show that when it comes to the minimum wage, two people who might otherwise agree on most things can look at exactly the same policy and come to drastically different conclusions.
[00:22:54] OK then, that is it for today's episode on the minimum wage.
[00:22:59] I hope it's been an interesting one and that you've learnt something new.
[00:23:03] As always, I would love to know what you thought of this episode. Is there a minimum wage in your country? How has it changed over time, and what do you think about its advantages and disadvantages?
[00:23:15] For the members among you, you can head right into our community forum, which is at community.leonardoenglish.com and get chatting away to other curious minds.
[00:23:24] You've been listening to English Learning for Curious Minds by Leonardo English.
[00:23:29] I'm Alastair Budge, you stay safe, and I'll catch you in the next episode.
[00:00:05] Hello, hello, hello, and welcome to English Learning for Curious Minds, by Leonardo English, the show where you can listen to fascinating stories and learn weird and wonderful things about the world at the same time as improving your English.
[00:00:20] I'm Alastair Budge, and today we are going to be talking about the minimum wage.
[00:00:27] In many countries around the world, there are laws stating the minimum amount of money that an employee should earn for doing a job, the so-called “minimum wage”.
[00:00:37] To some, this is a worthy achievement, a law that protects workers from exploitation at the hands of greedy corporations.
[00:00:47] To others, it is a red herring, a feel-good measure that hurts the very people it aims to help.
[00:00:55] So, in this episode, we’ll explore the history of the minimum wage, we’ll look at some of the arguments for and against, we’ll look at some examples of countries where it has worked, others where it hasn’t, we’ll talk about the particular case of the UK, and we’ll also learn about how sometimes not having a minimum wage, surprisingly enough, actually results in higher wages for the lowest paid workers.
[00:01:21] OK then, let’s get right into it, and talk about The Minimum Wage.
[00:01:29] I imagine that many of you can remember your first real paycheck.
[00:01:34] In the autumn, after I finished school, I worked in a pub in a nearby village, pulling pints, serving drinks and making small talk with the regulars.
[00:01:47] The shifts were quite long at times. 12 pm to 12 am was the longest one, if I’m not mistaken.
[00:01:55] Afterwards, I would go home on my bike, exhausted after 12 hours on my feet, serving drinkers who would sometimes get increasingly troublesome as the night went on.
[00:02:07] For my work, I was paid £4.25 every hour - the minimum wage in the UK at the time, or at least, the minimum wage for everyone under the age of 22.
[00:02:21] And for reference, this was in 2005, so it was about €6.
[00:02:28] It seemed like a lot to me. But I was living at home with my parents, I didn’t pay rent, and I didn’t pay for groceries. It seemed like a lot to a fresh-faced 18-year-old, but clearly, it wasn’t, at least not in the UK.
[00:02:46] It was the minimum that any company was legally allowed to pay an employee; I literally couldn’t have been paid any less.
[00:02:56] But of course, this idea, that the government should step in and set a legal minimum for how little someone can be paid, is a relatively new concept.
[00:03:08] For most of history, wages were determined by the market, or more accurately, by power.
[00:03:17] Whether you worked in the fields or later on in a factory, the amount you were paid was the result of a direct agreement between you and your employer.
[00:03:28] If you were desperate for work, and your employer knew it, they could pay you next to nothing.
[00:03:35] And they often did.
[00:03:37] Pick up any Charles Dickens novel and you’ll find depictions of evil employers squeezing their workers for every last penny, paying them the absolute minimum possible for them to not die of starvation or from freezing to death at home.
[00:03:55] And of course, the UK was not alone in this, in its basically “zero state intervention” policy in terms of the amount an employer needed to pay its employees.
[00:04:05] All over the world, workers typically had few protections, few safeguards ensuring that they were paid enough to live a decent life.
[00:04:17] And although it is now popular to talk about how we must crush the rich and how evil billionaires are exploiting the poor, the reality is that living standards and disposable income for the poorest in society, in practically every country in the world, have never been higher than they are today.
[00:04:38] This is thanks to economic growth, but there is an argument to be made that it is also thanks to the concept of the minimum wage. In other words, the lowest salaries in society are higher than ever before, thanks to government intervention, laws protecting workers from low pay.
[00:05:02] Governments first started to get involved at the end of the 19th century, and in fact, the first countries to legislate minimum wage laws were in a part of the world you might not necessarily expect: not post-revolutionary France or English factory workers weary of working 12 hours a day, 7 days a week.
[00:05:25] It was, in fact, on the other side of the world, in Australia and New Zealand.
[00:05:32] In both countries, there was growing concern that certain workers in certain industries, especially women working in clothes factories, were being paid so little that they couldn’t afford even the basic necessities of life.
[00:05:49] A small number of employers held all the power, and governments feared that unless something changed, there would be civil unrest, and they would have a French Revolution-type situation on their hands, with angry workers rising up against their rulers.
[00:06:08] The first laws came into place in 1894 in New Zealand, and in Australia two years later. Initially, they were focused on individual industries, but they quickly spread.
[00:06:23] The idea was codified by a 1907 law called The Harvester Case, which stated that there should be a 'living wage' for, and I’m quoting directly, a man, his wife, and three children to "live in frugal comfort".
[00:06:42] Frugal, by the way, means careful with money, so frugal comfort means living comfortably but without any luxuries.
[00:06:52] In other words, every job should pay enough to support a decent life for a family of five: a man, his wife, and three children.
[00:07:03] Now, perhaps you can complain about this seeming like an archaic view of the world, of a man going out to earn a living while his wife and three children stay at home. This was more than 100 years ago, so clearly, certain things were different.
[00:07:19] But what you might also quite rightly point out is that this “living wage” must surely have been more generous than a modern “living wage”, given that it aims to support one non-working parent and three children.
[00:07:36] In 21st-century Britain, at least, you would certainly struggle to support a family of five on the minimum wage.
[00:07:44] But back to the start of the 20th century.
[00:07:48] Understandably, the introduction of the minimum wage proved popular with workers, and the idea quickly spread.
[00:07:57] In 1909, the United Kingdom passed something called the Trade Boards Act, which established wage boards to set minimum wages in industries that were considered especially exploitative, things like garment work, where mainly women and children were exploited, forced to work long hours in terrible conditions for very low pay.
[00:08:21] In the United States, a national minimum wage came a little later, but not without a fight.
[00:08:29] It was introduced in 1938, during the Great Depression, as part of President Franklin D. Roosevelt’s New Deal.
[00:08:38] At the time, it was set at $0.25 an hour, around $5.70 in inflation-adjusted terms.
[00:08:47] Even though the idea had spread through much of Europe, it was still a radical idea in America.
[00:08:54] It was the biggest economy in the world, the roaring heart of capitalism, and the idea that the government should intervene and say “this is the minimum a company can pay its employees”, well, that was controversial.
[00:09:10] It would cost jobs, employers cried, it would result in people being paid less because companies would sack them. Companies would go out of business if they had to pay these higher wages.
[00:09:22] To this, President Franklin D. Roosevelt had a plain answer: tough luck.
[00:09:29] Or, as he put it, “ it seems to me to be equally plain that no business, which depends for existence on paying less than living wages to its workers, has any right to continue in this country."
[00:09:42] In other words, if you can’t pay a fair wage to your employees, you deserve to go out of business.
[00:09:50] Now, the minimum wage in the US today has not moved on much; the federal minimum wage is dismally low, at $7.25 an hour, but various states have different laws about what companies are required to pay their employees.
[00:10:07] Almost 100 years later, in the spiritual home of free-market capitalism, the debate about the minimum wage rages on.
[00:10:17] As it does, in fact, in every country that has legislated on the minimum wage, or where there are talks about changing or increasing it.
[00:10:26] Its supporters argue that it needs to be protected at all costs, created if it doesn’t exist already, or increased if it is considered too low.
[00:10:38] Without a fair minimum wage, the most vulnerable in society risk being even more exploited by powerful corporations.
[00:10:47] People would be at the mercy of employers who could pay as little as they liked, especially in industries where workers have very little bargaining power. A minimum wage ensures that there is at least a basic level of fairness, that no one working full-time should live in poverty.
[00:11:07] On the other hand, critics argue that setting a minimum wage could actually harm the very people it is designed to help.
[00:11:16] If you set the minimum wage too high, they argue, employers might respond by hiring fewer people, cutting hours, replacing workers with machines, or, of course, with AI.
[00:11:30] They say that it can lead to higher unemployment, especially among young people, those with lower levels of education, or those entering the job market for the first time.
[00:11:42] In other words, some people might be better off, those who keep their jobs and their same hours, but others will lose their jobs completely and be in a much worse economic position.
[00:11:56] And the arguments for and against the minimum wage go beyond ideas about how much money a worker will be paid.
[00:12:05] On the “pro minimum wage” side, supporters argue that it can also boost morale and productivity. When workers feel they are being treated fairly and paid a decent wage, they are more likely to take pride in their work, stay with their employer for longer, and to contribute more.
[00:12:24] This is good for them, good for their mental health, and it’s also good for the business, because it reduces turnover and increases productivity.
[00:12:35] Another argument in favour of the minimum wage is that it increases consumer spending.
[00:12:42] If low-wage workers have more money in their pockets, they are likely to spend it in their local communities, which helps stimulate the economy.
[00:12:52] The wealthier an individual is, the higher proportion of their income they save, so if a company pays low earners more, they will typically spend a greater percentage of what they make than what the wealthy company owners would spend.
[00:13:09] So, it’s a good thing for local and general economic growth.
[00:13:15] But there are also more arguments on the “anti-minimum wage” side.
[00:13:20] Firstly, the concern that it puts pressure on small businesses.
[00:13:26] A large multinational company might be able to absorb the higher wage costs, but for a small shop or restaurant operating on wafer-thin profit margins, it could mean the difference between staying open or shutting down.
[00:13:43] Some economists argue that a blanket minimum wage is a blunt tool, like trying to tend to a flowerbed with a lawnmower instead of precise little scissors.
[00:13:55] A blanket minimum wage treats every region and every industry the same, even though the cost of living and average wages vary hugely.
[00:14:07] In the UK, for example, the entire country is treated in the same way, it is a national minimum wage.
[00:14:14] As of April this year, it’s £12.21 an hour whether you live in central London or a remote village in the north of the country.
[00:14:24] And to state the obvious, like in almost every country, the cost of living varies a lot.
[00:14:31] What you can buy with £12.21 in London is very different from what you can buy with £12.21 in rural Wales or even a lower-cost-of-living city like Belfast or Newcastle.
[00:14:46] Yet the pay for a minimum wage worker is the same.
[00:14:52] This isn’t fair for workers, the argument goes, someone in London needs to be paid more, and someone in Newcastle doesn’t need to be paid as much.
[00:15:03] It also isn’t fair for businesses. A wage that is perfectly reasonable in high-cost central London might be completely unaffordable for a small business in a rural town.
[00:15:16] Now, I should add that some countries do legislate on the minimum wage at a more regional level, which evens out some of these disparities. In China, for example, the minimum wage in Beijing is almost 70% higher than it is in rural western China, which helps account for the different cost of living.
[00:15:39] There is also the argument that the minimum wage, if set too low, legitimises and encourages low pay.
[00:15:49] In the UK, many minimum wage workers are still forced to turn to the state for financial assistance. But because their employers have met their legal obligations, they can wash their hands of the situation, saying “we’re paying what we need to do”, rather than paying a fair and honest wage to their workers.
[00:16:12] And finally, there is also the argument that it does not necessarily target those who need help the most.
[00:16:20] In some cases, the person earning a minimum wage might be a student living at home, like I was, or a second earner in a well-off household.
[00:16:32] In other words, not everyone earning the minimum wage is living in poverty, and not everyone in poverty is earning the minimum wage.
[00:16:42] So, what would happen if there were no minimum wage?
[00:16:47] In theory, to the critics of the minimum wage at least, businesses and employees would be free to set their own wages. People in high-cost-of-living areas would be paid more, and people in lower-cost-of-living areas would be paid less.
[00:17:05] And this is not just theory. There are actually plenty of examples of countries without minimum wage laws, some where employees are paid much more than in countries which have minimum wages.
[00:17:19] Sweden, for example, has no minimum wage laws, yet it has one of the highest median wages in Europe. In fact, most Scandinavian countries, which tend to be at the top of every table with average wages and living standards, they don’t have national minimum wage laws.
[00:17:41] Now, this isn’t due to the great benevolence and kindness of Scandinavian employers, but rather that most jobs are covered by trade union agreements, so the union will negotiate wages on behalf of employees.
[00:17:58] These employees are highly protected in terms of what a company can pay them, the protection just comes from the trade union, not the state.
[00:18:07] The logic behind this is that wages are better determined by those who understand the specific needs of an industry, rather than by politicians, and, given the relatively high wages of the lowest-paid workers in Scandinavia, it’s hard to deny that it works pretty well.
[00:18:27] Now, the last thing I want to talk about today is the situation in the UK, because something interesting has been happening with the minimum wage.
[00:18:37] Ever since the national minimum wage was introduced by Tony Blair in 1999, it has continued to rise.
[00:18:45] It started at £3.60 an hour, and in April this year it was increased from £11.44 to £12.21 an hour.
[00:18:58] Compounded, this is an average growth of almost 5% a year, which is significantly higher than the growth in non-minimum wage jobs, which increased at a rate of 2.8% a year.
[00:19:12] So the minimum wage increased almost twice as much as the average salary, which has led to this slightly unusual situation in which the difference between minimum wage jobs and more skilled jobs has been massively reduced.
[00:19:31] For example, the salary for a graduate nuclear engineer in the UK starts at around £22,000 year, which is around €25,000.
[00:19:45] The minimum wage of £12.21 an hour, for someone working full-time, would result in a salary of £23,873 a year, more than a graduate nuclear engineer.
[00:20:00] Now, clearly, the nuclear engineer most likely has better career prospects; they can get promoted, paid more, and perhaps the work is more fulfilling than in many minimum-wage jobs.
[00:20:13] Perhaps you might even argue that this is the way it should be, that someone doing public service cleaning the streets in the rain should be paid just as much, more, even, than someone sitting behind a desk and answering emails.
[00:20:28] But there have been plenty of stories in the British press over the past few years of young people complaining about this situation, asking themselves why they should slave away at university for 3 or 4 years, getting into tens of thousands of pounds of debt only to get a job where they are paid the same as someone working in an unskilled, minimum wage job.
[00:20:53] “What’s the point of studying and working hard,” they ask, “if it isn’t going to result in any better financial situation?”
[00:21:02] To wrap things up, the minimum wage is one of those fascinating topics that divides people on both sides of the political spectrum.
[00:21:12] On the right, there are those who oppose it because they see it as excessive government intervention in the free market, something that distorts natural supply and demand and risks killing jobs. But there are also those on the right who support it as a way of reducing the need for government welfare, arguing that if people are paid more, they rely less on the state.
[00:21:36] On the left, there are those who support it because it protects vulnerable workers, reduces inequality, and ensures a basic level of dignity in work. But they have colleagues on the left who criticise it as a distraction, arguing that it doesn't go far enough, and that we should be talking instead about living wages, stronger unions, or even universal basic income.
[00:22:03] Indeed, when I was researching this episode and I wanted to double-check the date that Tony Blair’s government implemented the minimum wage, I googled “Tony Blair minimum wage”.
[00:22:16] The first two results I got were both from left-leaning publications: Jacobin and The Guardian.
[00:22:24] The first result read “Britain’s Minimum Wage Law Has Been an Abject Failure”.
[00:22:32] And the second read, “Minimum wage is UK’s ‘most successful economic policy in a generation’”.
[00:22:40] It just goes to show that when it comes to the minimum wage, two people who might otherwise agree on most things can look at exactly the same policy and come to drastically different conclusions.
[00:22:54] OK then, that is it for today's episode on the minimum wage.
[00:22:59] I hope it's been an interesting one and that you've learnt something new.
[00:23:03] As always, I would love to know what you thought of this episode. Is there a minimum wage in your country? How has it changed over time, and what do you think about its advantages and disadvantages?
[00:23:15] For the members among you, you can head right into our community forum, which is at community.leonardoenglish.com and get chatting away to other curious minds.
[00:23:24] You've been listening to English Learning for Curious Minds by Leonardo English.
[00:23:29] I'm Alastair Budge, you stay safe, and I'll catch you in the next episode.
[00:00:05] Hello, hello, hello, and welcome to English Learning for Curious Minds, by Leonardo English, the show where you can listen to fascinating stories and learn weird and wonderful things about the world at the same time as improving your English.
[00:00:20] I'm Alastair Budge, and today we are going to be talking about the minimum wage.
[00:00:27] In many countries around the world, there are laws stating the minimum amount of money that an employee should earn for doing a job, the so-called “minimum wage”.
[00:00:37] To some, this is a worthy achievement, a law that protects workers from exploitation at the hands of greedy corporations.
[00:00:47] To others, it is a red herring, a feel-good measure that hurts the very people it aims to help.
[00:00:55] So, in this episode, we’ll explore the history of the minimum wage, we’ll look at some of the arguments for and against, we’ll look at some examples of countries where it has worked, others where it hasn’t, we’ll talk about the particular case of the UK, and we’ll also learn about how sometimes not having a minimum wage, surprisingly enough, actually results in higher wages for the lowest paid workers.
[00:01:21] OK then, let’s get right into it, and talk about The Minimum Wage.
[00:01:29] I imagine that many of you can remember your first real paycheck.
[00:01:34] In the autumn, after I finished school, I worked in a pub in a nearby village, pulling pints, serving drinks and making small talk with the regulars.
[00:01:47] The shifts were quite long at times. 12 pm to 12 am was the longest one, if I’m not mistaken.
[00:01:55] Afterwards, I would go home on my bike, exhausted after 12 hours on my feet, serving drinkers who would sometimes get increasingly troublesome as the night went on.
[00:02:07] For my work, I was paid £4.25 every hour - the minimum wage in the UK at the time, or at least, the minimum wage for everyone under the age of 22.
[00:02:21] And for reference, this was in 2005, so it was about €6.
[00:02:28] It seemed like a lot to me. But I was living at home with my parents, I didn’t pay rent, and I didn’t pay for groceries. It seemed like a lot to a fresh-faced 18-year-old, but clearly, it wasn’t, at least not in the UK.
[00:02:46] It was the minimum that any company was legally allowed to pay an employee; I literally couldn’t have been paid any less.
[00:02:56] But of course, this idea, that the government should step in and set a legal minimum for how little someone can be paid, is a relatively new concept.
[00:03:08] For most of history, wages were determined by the market, or more accurately, by power.
[00:03:17] Whether you worked in the fields or later on in a factory, the amount you were paid was the result of a direct agreement between you and your employer.
[00:03:28] If you were desperate for work, and your employer knew it, they could pay you next to nothing.
[00:03:35] And they often did.
[00:03:37] Pick up any Charles Dickens novel and you’ll find depictions of evil employers squeezing their workers for every last penny, paying them the absolute minimum possible for them to not die of starvation or from freezing to death at home.
[00:03:55] And of course, the UK was not alone in this, in its basically “zero state intervention” policy in terms of the amount an employer needed to pay its employees.
[00:04:05] All over the world, workers typically had few protections, few safeguards ensuring that they were paid enough to live a decent life.
[00:04:17] And although it is now popular to talk about how we must crush the rich and how evil billionaires are exploiting the poor, the reality is that living standards and disposable income for the poorest in society, in practically every country in the world, have never been higher than they are today.
[00:04:38] This is thanks to economic growth, but there is an argument to be made that it is also thanks to the concept of the minimum wage. In other words, the lowest salaries in society are higher than ever before, thanks to government intervention, laws protecting workers from low pay.
[00:05:02] Governments first started to get involved at the end of the 19th century, and in fact, the first countries to legislate minimum wage laws were in a part of the world you might not necessarily expect: not post-revolutionary France or English factory workers weary of working 12 hours a day, 7 days a week.
[00:05:25] It was, in fact, on the other side of the world, in Australia and New Zealand.
[00:05:32] In both countries, there was growing concern that certain workers in certain industries, especially women working in clothes factories, were being paid so little that they couldn’t afford even the basic necessities of life.
[00:05:49] A small number of employers held all the power, and governments feared that unless something changed, there would be civil unrest, and they would have a French Revolution-type situation on their hands, with angry workers rising up against their rulers.
[00:06:08] The first laws came into place in 1894 in New Zealand, and in Australia two years later. Initially, they were focused on individual industries, but they quickly spread.
[00:06:23] The idea was codified by a 1907 law called The Harvester Case, which stated that there should be a 'living wage' for, and I’m quoting directly, a man, his wife, and three children to "live in frugal comfort".
[00:06:42] Frugal, by the way, means careful with money, so frugal comfort means living comfortably but without any luxuries.
[00:06:52] In other words, every job should pay enough to support a decent life for a family of five: a man, his wife, and three children.
[00:07:03] Now, perhaps you can complain about this seeming like an archaic view of the world, of a man going out to earn a living while his wife and three children stay at home. This was more than 100 years ago, so clearly, certain things were different.
[00:07:19] But what you might also quite rightly point out is that this “living wage” must surely have been more generous than a modern “living wage”, given that it aims to support one non-working parent and three children.
[00:07:36] In 21st-century Britain, at least, you would certainly struggle to support a family of five on the minimum wage.
[00:07:44] But back to the start of the 20th century.
[00:07:48] Understandably, the introduction of the minimum wage proved popular with workers, and the idea quickly spread.
[00:07:57] In 1909, the United Kingdom passed something called the Trade Boards Act, which established wage boards to set minimum wages in industries that were considered especially exploitative, things like garment work, where mainly women and children were exploited, forced to work long hours in terrible conditions for very low pay.
[00:08:21] In the United States, a national minimum wage came a little later, but not without a fight.
[00:08:29] It was introduced in 1938, during the Great Depression, as part of President Franklin D. Roosevelt’s New Deal.
[00:08:38] At the time, it was set at $0.25 an hour, around $5.70 in inflation-adjusted terms.
[00:08:47] Even though the idea had spread through much of Europe, it was still a radical idea in America.
[00:08:54] It was the biggest economy in the world, the roaring heart of capitalism, and the idea that the government should intervene and say “this is the minimum a company can pay its employees”, well, that was controversial.
[00:09:10] It would cost jobs, employers cried, it would result in people being paid less because companies would sack them. Companies would go out of business if they had to pay these higher wages.
[00:09:22] To this, President Franklin D. Roosevelt had a plain answer: tough luck.
[00:09:29] Or, as he put it, “ it seems to me to be equally plain that no business, which depends for existence on paying less than living wages to its workers, has any right to continue in this country."
[00:09:42] In other words, if you can’t pay a fair wage to your employees, you deserve to go out of business.
[00:09:50] Now, the minimum wage in the US today has not moved on much; the federal minimum wage is dismally low, at $7.25 an hour, but various states have different laws about what companies are required to pay their employees.
[00:10:07] Almost 100 years later, in the spiritual home of free-market capitalism, the debate about the minimum wage rages on.
[00:10:17] As it does, in fact, in every country that has legislated on the minimum wage, or where there are talks about changing or increasing it.
[00:10:26] Its supporters argue that it needs to be protected at all costs, created if it doesn’t exist already, or increased if it is considered too low.
[00:10:38] Without a fair minimum wage, the most vulnerable in society risk being even more exploited by powerful corporations.
[00:10:47] People would be at the mercy of employers who could pay as little as they liked, especially in industries where workers have very little bargaining power. A minimum wage ensures that there is at least a basic level of fairness, that no one working full-time should live in poverty.
[00:11:07] On the other hand, critics argue that setting a minimum wage could actually harm the very people it is designed to help.
[00:11:16] If you set the minimum wage too high, they argue, employers might respond by hiring fewer people, cutting hours, replacing workers with machines, or, of course, with AI.
[00:11:30] They say that it can lead to higher unemployment, especially among young people, those with lower levels of education, or those entering the job market for the first time.
[00:11:42] In other words, some people might be better off, those who keep their jobs and their same hours, but others will lose their jobs completely and be in a much worse economic position.
[00:11:56] And the arguments for and against the minimum wage go beyond ideas about how much money a worker will be paid.
[00:12:05] On the “pro minimum wage” side, supporters argue that it can also boost morale and productivity. When workers feel they are being treated fairly and paid a decent wage, they are more likely to take pride in their work, stay with their employer for longer, and to contribute more.
[00:12:24] This is good for them, good for their mental health, and it’s also good for the business, because it reduces turnover and increases productivity.
[00:12:35] Another argument in favour of the minimum wage is that it increases consumer spending.
[00:12:42] If low-wage workers have more money in their pockets, they are likely to spend it in their local communities, which helps stimulate the economy.
[00:12:52] The wealthier an individual is, the higher proportion of their income they save, so if a company pays low earners more, they will typically spend a greater percentage of what they make than what the wealthy company owners would spend.
[00:13:09] So, it’s a good thing for local and general economic growth.
[00:13:15] But there are also more arguments on the “anti-minimum wage” side.
[00:13:20] Firstly, the concern that it puts pressure on small businesses.
[00:13:26] A large multinational company might be able to absorb the higher wage costs, but for a small shop or restaurant operating on wafer-thin profit margins, it could mean the difference between staying open or shutting down.
[00:13:43] Some economists argue that a blanket minimum wage is a blunt tool, like trying to tend to a flowerbed with a lawnmower instead of precise little scissors.
[00:13:55] A blanket minimum wage treats every region and every industry the same, even though the cost of living and average wages vary hugely.
[00:14:07] In the UK, for example, the entire country is treated in the same way, it is a national minimum wage.
[00:14:14] As of April this year, it’s £12.21 an hour whether you live in central London or a remote village in the north of the country.
[00:14:24] And to state the obvious, like in almost every country, the cost of living varies a lot.
[00:14:31] What you can buy with £12.21 in London is very different from what you can buy with £12.21 in rural Wales or even a lower-cost-of-living city like Belfast or Newcastle.
[00:14:46] Yet the pay for a minimum wage worker is the same.
[00:14:52] This isn’t fair for workers, the argument goes, someone in London needs to be paid more, and someone in Newcastle doesn’t need to be paid as much.
[00:15:03] It also isn’t fair for businesses. A wage that is perfectly reasonable in high-cost central London might be completely unaffordable for a small business in a rural town.
[00:15:16] Now, I should add that some countries do legislate on the minimum wage at a more regional level, which evens out some of these disparities. In China, for example, the minimum wage in Beijing is almost 70% higher than it is in rural western China, which helps account for the different cost of living.
[00:15:39] There is also the argument that the minimum wage, if set too low, legitimises and encourages low pay.
[00:15:49] In the UK, many minimum wage workers are still forced to turn to the state for financial assistance. But because their employers have met their legal obligations, they can wash their hands of the situation, saying “we’re paying what we need to do”, rather than paying a fair and honest wage to their workers.
[00:16:12] And finally, there is also the argument that it does not necessarily target those who need help the most.
[00:16:20] In some cases, the person earning a minimum wage might be a student living at home, like I was, or a second earner in a well-off household.
[00:16:32] In other words, not everyone earning the minimum wage is living in poverty, and not everyone in poverty is earning the minimum wage.
[00:16:42] So, what would happen if there were no minimum wage?
[00:16:47] In theory, to the critics of the minimum wage at least, businesses and employees would be free to set their own wages. People in high-cost-of-living areas would be paid more, and people in lower-cost-of-living areas would be paid less.
[00:17:05] And this is not just theory. There are actually plenty of examples of countries without minimum wage laws, some where employees are paid much more than in countries which have minimum wages.
[00:17:19] Sweden, for example, has no minimum wage laws, yet it has one of the highest median wages in Europe. In fact, most Scandinavian countries, which tend to be at the top of every table with average wages and living standards, they don’t have national minimum wage laws.
[00:17:41] Now, this isn’t due to the great benevolence and kindness of Scandinavian employers, but rather that most jobs are covered by trade union agreements, so the union will negotiate wages on behalf of employees.
[00:17:58] These employees are highly protected in terms of what a company can pay them, the protection just comes from the trade union, not the state.
[00:18:07] The logic behind this is that wages are better determined by those who understand the specific needs of an industry, rather than by politicians, and, given the relatively high wages of the lowest-paid workers in Scandinavia, it’s hard to deny that it works pretty well.
[00:18:27] Now, the last thing I want to talk about today is the situation in the UK, because something interesting has been happening with the minimum wage.
[00:18:37] Ever since the national minimum wage was introduced by Tony Blair in 1999, it has continued to rise.
[00:18:45] It started at £3.60 an hour, and in April this year it was increased from £11.44 to £12.21 an hour.
[00:18:58] Compounded, this is an average growth of almost 5% a year, which is significantly higher than the growth in non-minimum wage jobs, which increased at a rate of 2.8% a year.
[00:19:12] So the minimum wage increased almost twice as much as the average salary, which has led to this slightly unusual situation in which the difference between minimum wage jobs and more skilled jobs has been massively reduced.
[00:19:31] For example, the salary for a graduate nuclear engineer in the UK starts at around £22,000 year, which is around €25,000.
[00:19:45] The minimum wage of £12.21 an hour, for someone working full-time, would result in a salary of £23,873 a year, more than a graduate nuclear engineer.
[00:20:00] Now, clearly, the nuclear engineer most likely has better career prospects; they can get promoted, paid more, and perhaps the work is more fulfilling than in many minimum-wage jobs.
[00:20:13] Perhaps you might even argue that this is the way it should be, that someone doing public service cleaning the streets in the rain should be paid just as much, more, even, than someone sitting behind a desk and answering emails.
[00:20:28] But there have been plenty of stories in the British press over the past few years of young people complaining about this situation, asking themselves why they should slave away at university for 3 or 4 years, getting into tens of thousands of pounds of debt only to get a job where they are paid the same as someone working in an unskilled, minimum wage job.
[00:20:53] “What’s the point of studying and working hard,” they ask, “if it isn’t going to result in any better financial situation?”
[00:21:02] To wrap things up, the minimum wage is one of those fascinating topics that divides people on both sides of the political spectrum.
[00:21:12] On the right, there are those who oppose it because they see it as excessive government intervention in the free market, something that distorts natural supply and demand and risks killing jobs. But there are also those on the right who support it as a way of reducing the need for government welfare, arguing that if people are paid more, they rely less on the state.
[00:21:36] On the left, there are those who support it because it protects vulnerable workers, reduces inequality, and ensures a basic level of dignity in work. But they have colleagues on the left who criticise it as a distraction, arguing that it doesn't go far enough, and that we should be talking instead about living wages, stronger unions, or even universal basic income.
[00:22:03] Indeed, when I was researching this episode and I wanted to double-check the date that Tony Blair’s government implemented the minimum wage, I googled “Tony Blair minimum wage”.
[00:22:16] The first two results I got were both from left-leaning publications: Jacobin and The Guardian.
[00:22:24] The first result read “Britain’s Minimum Wage Law Has Been an Abject Failure”.
[00:22:32] And the second read, “Minimum wage is UK’s ‘most successful economic policy in a generation’”.
[00:22:40] It just goes to show that when it comes to the minimum wage, two people who might otherwise agree on most things can look at exactly the same policy and come to drastically different conclusions.
[00:22:54] OK then, that is it for today's episode on the minimum wage.
[00:22:59] I hope it's been an interesting one and that you've learnt something new.
[00:23:03] As always, I would love to know what you thought of this episode. Is there a minimum wage in your country? How has it changed over time, and what do you think about its advantages and disadvantages?
[00:23:15] For the members among you, you can head right into our community forum, which is at community.leonardoenglish.com and get chatting away to other curious minds.
[00:23:24] You've been listening to English Learning for Curious Minds by Leonardo English.
[00:23:29] I'm Alastair Budge, you stay safe, and I'll catch you in the next episode.
