Minimum wage: could you live on £6.19 an hour?

by Cliff D'Arcy on 09 October 2012  |  42 comments
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The minimum wage for over-21s has risen by 11p an hour. How far could you make it go?

Good news for low-paid workers: the main rate of the national minimum wage has increased to £6.19 an hour.

This was an uplift of 11p an hour over the main rate of £6.08 which applied for the previous 12 months. In effect, low-paid workers got a 1.8% pay hike from the Government (ignoring any rises given to them by their employers).

Most employees in the UK are entitled to the minimum wage, regardless of how and when they are paid, the number of hours they work, their type and location of work, and the size of their employers. Any contract which offers an hourly rate lower than the minimum wage is not legally valid and could lead to an employer being prosecuted.

Not everyone gains

Now for the bad news: the main rate applies only to workers aged 21 and over, so teenagers and young adults on low wages won't benefit from this pay rise. For the record, here are the current and previous rates of the minimum wage for different age groups:

As you can see, workers aged 16 to 20 have seen their rates frozen for the coming year. However, apprentices gained another 5p an hour, an increase of 1.9%. The minimum wage doesn't apply to workers aged below 16, so it's entirely up to their employers how much to pay child workers.

Higher pay for millions

Following the enactment of the National Minimum Wage Act in 1998, the minimum wage came into force on 1 April 1999. Here's how the main rate (for over-21s) has climbed steadily since then:

Source: The Low Pay Commission

Having been introduced at £3.60 in April 1999, the main rate has risen every year since. The lowest increase was just 7p an hour (1.2%) in October 2009, in the aftermath of the global financial crisis. The highest increase was 40p an hour (10.8%) in October 2001. Since 2009, increases have been fairly modest, ranging from 1.2% in 2009 to 2.5% last year. 

How much does it add up to?

While this may not seem like a lot, it comes to even less after income tax and National Insurance contributions (NICs) are subtracted. These deductions total £1,588.02, giving take-home pay of £11,287.18.

So working 40 hours a week on the main rate of the minimum wage would give you £940.60 a month to live on. It doesn't sound like a whole lot.

A wage for living, not thriving

According to the Office for National Statistics (ONS), median gross (before-tax) earnings for full-time workers in April 2011 were £501 a week. 'Median' means the midpoint, so half of workers earn more than this figure, while half earn less.

This median average wage works out at a yearly salary of £26,052, or £2,171 a month. After deducting income tax and NICs totalling £5,804.60, this produces tax-home pay of £20,247.40 a year, or £1,687.28 a month.

So the average full-time worker in the UK earns £746.68 a month more than someone working 40 hours a week on the main rate of the minimum wage. In effect, the disposable income of an employee on the minimum wage is just over half (56%) that earned by the average full-time worker.

Could you live on £940 a month?

It seems to me that it would be an incredibly difficult budgeting challenge for even a single adult to get by on a mere £940 a month.

While young workers living at home could probably get by -- and even save substantial sums -- on this take-home pay, tenants would surely struggle to make ends meet after paying rent. Also, without a huge windfall to use as a deposit, buying a home while working for the minimum wage would be completely out of the question.

What's more, anyone with a non-working partner and/or children must really struggle to balance their household books trying to house, clothe and feed, say, two adults and two children. Frankly, this would test even the most dedicated penny-pinchers.

What are your experiences of earning, and living on, the minimum wage? Please tell us in the comments box below...

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