Unforeseen consequences of the new Minimum Wage

I mentioned how the new minimum wage was devised by people who obviously didn't understand how it would be used, but what other effects does it have?

The previous wage per hour was set at £6.08. Assume a person is on a salaried income working 9-5 with a half hour lunch break. That's 37.5 hours per week and exactly £228 per week in wages. Assuming a standard 810L tax code that breaks down as follows:

£228 Gross Salary
£9.84 NI
£14.40 PAYE.

Except the employer also has to pay NI and that comes to £11.60. The government gets £35.84, the employee gets £203.76 and the employer has to pay out £239.60 total.

With the increase to £6.19 an hour at 37.5 hours the employee gets £232.125 (because it's stupid). To keep it simple let's round that to £233 (can't round down or it's below the limit).

£233 Gross Salary
£10.44 NI
£15.40 PAYE.

Again the employer pays NI this time it's £12.29. The government gets £38.13, the employee gets £207.16 and the employer has to pay out £245.29 total.

So the government gains £2.29 a week or £119.08 a year, the employee gains £3.40 a week or £176.80 a year and the employer loses £5.69 a week or £295.88 a year.

Given that in 2007 the number of workers on minimum wage was 1.7m and assuming they all work a 37.5 week that's an extra £202,436,000 a year going straight to the government and an extra £502,996,000 a year out of businesses.

I'm not saying the minimum wage shouldn't increase only that it should be done in line with tax threshold changes too.