In the late 1990's a minimum wage was introduced to protect the lowest paid. It set the floor price in the labour market.
The arguments for the minimum wage was that the relative bargaining power of some workers was too weak to obtain a fair wage. Therefore government would ensure they received one and so reduce in-work poverty.
The argument against the minimum wage was that it would cause wage costs to rise too far and firms would simply reduce employed numbers as workers became too expensive.
In the event there is little (if any) evidence that workers lost their jobs due to the minimum wage. It certainly meant that some workers got pay rises that allowed them a better standard of living.
However the minimum wage was introduced at a much lower level than some wanted. They argued that the minimum wage level set was still too low to allow families a reasonable standard of living. The result was the calculation of a 'Living wage'. This could be defined as:
A living wage is the minimum income necessary for a worker to meet basic needs (for an extended period of time or for a lifetime). These needs include shelter (housing) and other incidentals such as clothing and nutrition.
There are two articles linked below. One is the Daily Mirror's coverage of this weeks story. The other is the Living Wage Foundations explanation of what it means and its advantages.
Of course there is an argument against it. If wage costs rise then workers become more expensive and some may lose their jobs. So higher wages for some are paid for by no wages for others.
The economics of the Living Wage is partly about setting price floors in markets. It is also about what should be done.
