Osborne’s ‘living wage’ will help richer households the most

Last week’s tax credit debacle has highlighted how even well-informed people believe that the £9 minimum wage (misleadingly dubbed ‘living wage’ by the government) is a progressive measure that will help the poorest the most. The low-paid are being hit by tax credit cuts, it’s argued, but don’t worry, soon they’ll get a £9 minimum wage! In fact, the minimum wage only affects the lowest 4pc of workers, and a surprising number of them are second earners in wealthier households. So the biggest cash gains will go to the richest households.

The reality of the minimum wage always has been more complex than its proponents believe This problem was pointed out by the Office for Budget Responsibility on the day that George Osborne’s plan was published – but, perhaps understandably, the Treasury didn’t want to draw attention to it. I thought it worth a blog now.

Here’s the OBR document, showing which households will gain the most from a £9 minimum wage.