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So, is £45Bn the true cost of the National Living Wage?
My latest blogpost: 'What is not seen' or Perhaps it is?Tweet this!
Easy to estimate.Low paid worker would get maybe £7,500 a year wage, the value of his output is double that, tops = £15,000. How many additional jobs would there be if no NMW? I dunno, call it 2 million? 2m x £15 = £30 billion.So £45 bn is a large number but plausible, being about 2% of GDP.
"So, is £45Bn the true cost of the National Living Wage?"Yes if a) the removal of the NLW would cause the percentage of NEETS to fall from 17% to 10% andb) each of those 460,000 extra jobs contributed £100,000 to the economy. (From the ONS, there are approximately 6.6M Britons in the 16-24 age range. 7% of that is 460,000. £45Bn divided by 460,000, say 450,000 to make things simpler, is £100,000) How many 16-24 year olds are going to contribute £100,000 a year to GDP in their first job?So no.Of course, removal of the NLW might produce an uplift in GDP in other age ranges, but the £45Bn is not a useful figure for estimating that as it a) appears to be made up and b) refers only to the 16-24 age range.
MW / B I am now confused!!! :-)
L, Mark's back of the fag packet calculation is the best guide. Choose a figure for the number of extra jobs if you don't think 2 million is reasonable, multiply by £15K and there's your answer.
L, as B says, estimating lost output at £100,000 per unemployed worker is ridiculous, that is off the scale, seeing as the average value added per existing worker is more like £50,000. Clearly, the lost output will be approx. twice what the wage would be; somebody on the NMW of £10,000 might generate output of £20,000. If you reduce the NMW to £5 an hour, there will of course be a lot more jobs, but the total value of output per extra worker will be about £15,000, and so on.So the big unknown is how many extra jobs there would be, and we will never find that out without reducing means testing of benefits.
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