IFS Zooms In: The Economy Does the minimum wage cost jobs?
Jan 29, 2026
Alan Manning, LSE professor known for research on minimum wages, and Eduin Latimer, IFS economist specialising in low-pay policy, unpack the UK minimum wage. They explore evidence on employment effects, pay compression and promotion incentives. They debate who pays higher wages, interactions with employment rights, and risks for young workers as policy evolves.
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Minimum Wage Has Grown Well Above Inflation
- The UK minimum wage rose much faster than prices since 1999, reaching over £12 for adults.
- This places the UK among countries with the highest minimum wages relative to median pay.
Two Core Justifications For The Minimum Wage
- The minimum wage aims to reduce inequality and correct power imbalances between employers and workers.
- Alan Manning warns there is a limit where too-high wages could price workers out of jobs, but that limit is uncertain.
Minimum Wage Affects Many More Than The Bottom
- About 6% of workers earn the minimum wage and roughly 20% earn within £1 of it, so increases ripple up pay distributions.
- Employers often lift pay of workers slightly above the floor to maintain differentials, compressing wages.