It is a “real worry” that increasing minimum wage seems to be the government’s “only tool” to tackle the cost of living crisis, a leading economist has warned.
Paul Johnson, director of the Institute of Fiscal Studies, said if wages are increased when the UK’s productivity is not rising “in the end it will just result in higher prices”.
Speaking on The Great Debate, Sky News’ weekly discussion programme, he said the increases in the minimum wage “up until now have been incredibly successful”.
“It’s gone up an awful lot over the last 10 years,” he said. “And that doesn’t appear to have caused any problems with prices, or unemployment. But going forward, there’s a limit to this.”
He said: “I think one of the real worries is it seems to be the only tool the government has.
“At the moment, it’s worried about people’s earnings, it’s worried about productivity, and the main policy it appears to have is just to keep on putting the national living wage up… that’s going to cause real problems.”
UK productivity has slowed significantly in the past 10 years, according to ONS data.
Average annual growth was an average of 2.0% from 1990 to 2007, falling to an average of 0.6% a year from 2010 to 2019, according to calculations by the Financial Times using ONS data.
He said the UK is facing a “push up” in prices that has not been seen for “quite a long time”, with inflation heading up towards four or even five percent.
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Source : skynews
