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Will paying people more money improve the economy?

A new report thinks so

The Institute for Public Policy Research (IPPR) says an easy way to boost the UK economy would be to raise the minimum wage.

What it means: Right now the UK economy isn’t growing all that fast. Whether you think that’s a problem or not depends on whether you think growth rate is a good way to measure how well a country is doing. (Bhutan, for example, judges itself on how happy people are instead).

Plenty of people do think a slow growth rate is not good, however, so the IPPR decided to come up with a solution. Their crack team included a famous fund manager (makes sense), the head of a powerful trade union (seems relevant) and the Archbishop of Canterbury (sorry, what?).

They concluded that if wages were at least £8.75 an hour (£10.20 in London because it costs more to live there) then people would do their jobs much better. This matters because the better we all do our jobs - the more burgers we flip, the more bricks we lay, the more reports we write - the higher the UK’s productivity is, and the faster its economy grows. Mo’ stuff = mo’ money, basically. (If you like growth, remember).

But people who oppose raising the minimum wage say it makes it too expensive for companies to hire lots, or any, workers. The end result is that more people won’t be able to get a job at all. If you’ve read about the big profits many companies make (we hear Amazon has a spare few quid lying around) you might think that sounds suspect. But pay can be a big expense for small companies and startups, and they employ 60% of private-sector workers.

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