Britain’s big squeeze: middle-class and minimum-wage

For young ARFrfrfhigh-flyers with an interest in marine conservation, it is the perfect gig. A charity is hunting for eager graduates (with at least a high upper-second degree and excellent -level results, naturally) to work full time as a guardian of the ocean. At £25,300 ($32,110), the annual pay is typical for a graduate role. Come April next year, it will also be near the minimum wage.Graduate schemes with a minimum-wage salary will become only more common after , the chancellor, cranked up the statutory minimum in the budget last month. A rise of 6.7%, to £12.21 an hour, will kick in next spring. Someone working full time on a minimum wage can expect to earn around £25,000 a year, about the same as a prospective turtle-botherer.Wage compression—when wages for skilled and unskilled labour begin to merge—has already changed Britain’s labour market. Workers in the middle have struggled; workers at the bottom have, in relative terms, done well. In 1997 a median earner took home almost double the income of someone at the tenth percentile, according to the Resolution Foundation (), a think-tank. In 2023 they managed only 50% more. That is largely owing to Britain’s increasingly generous minimum wage, which, at 66% of median income, is now one of the highest on the planet.In an era of stagnant wages for Britain’s middle class, normally precarious professions—bar workers, cleaners and shop-floor staff—have enjoyed a relative bonanza due to government diktat. Median hourly wages for bar workers jumped by 26% in real terms between 2011 and 2023, according to the . In contrast, median salaries overall rose by a paltry 1.9%. In a country as class-obsessed as Britain, that raises an unpleasant question: what happens when middle-class jobs attract the same pay as working-class ones?Many have not yet absorbed how much has changed. A decade of lousy overall wage growth means that some employers, and prospective employees, assume that any five-figure salary starting with a number two is still relatively generous. A junior graphic designer (preferably with a degree and two years’ experience) can expect to earn £22,000, which will soon be below minimum wage. An organiser for a “climate parliament” can command a similar salary, provided they are fluent in English and French.But those who have clocked the change are often unhappy. Junior doctors, who have been fighting the government over pay for much of the past decade, are the noisiest example. The British Medical Association, their union, has made much of the fact that Pret A Manger employees can earn more than a doctor. For some this was a sign of snobbery (are doctors inherently better people than baristas?). For others it was mere fairness (they are certainly more useful after a car crash). Either way the strategy worked: among Labour’s first actions in office earlier this year was handing doctors a 22% pay rise over two years.Being middle class and on a minimum wage has specific perils. In a progressive tax system those who earn less, pay less. But when graduates are badly paid, this deal turns to dust. From April the threshold for paying back a student loan (£25,000) and the minimum wage on a full-time job will cross over. The result is that any graduate with a full-time job, whether that be stacking shelves in Tesco or training as a lawyer, will face a de facto marginal tax rate of at least 37%. Britain has developed a bizarre tax system based on age (pensioners are exempt from national-insurance contributions) and education (graduates take home less money). If history shows anything, it is that creating a group of people who are overeducated and overtaxed can lead to funny things.Should voters begin to gripe about wage compression, it would mark the end of the closest thing to a free lunch there has been in British public policy. The minimum wage is the most successful policy intervention of the past quarter-century, argues Nye Cominetti of the . Usually policies have pros and cons. The pros came (wages went up for the hitherto badly paid) but the cons never seemed to arrive (unemployment was barely affected). As a result, successive governments, both Conservative and Labour, jacked up the minimum wage at almost every opportunity, like monkeys in a laboratory hooked up to an opium dispenser.But the political consequences of wage compression cannot be dodged forever. When Mr Cominetti appeared on Radio 5 recently to extol the virtues of a higher minimum wage, an angry lorry driver preceded him. “What’s the point in you working extremely hard if you can earn almost the same just doing minimum-wage jobs?” he asked. An alliance of lorry drivers and doctors would be curious but potentially powerful. Pay compression is not popular so much as little-noticed, at least for now. Politicians confuse equality with fairness at their peril.Politics is less about where people are in the pecking order than where they think they should be. Graduates who work in non-graduate roles are more likely to vote for radical-right parties than their peers in graduate jobs, point out Ben Ansell and Jane Gingrich, in a useful paper that does away with the idea that degree-holders in the West are a monolithic blob. The “never made it” are as much of a problem as the “left behind”.Perhaps Britain is happy to be a little more socially democratic. Those in the middle can swallow lower wages in the knowledge that it might make Britain more competitive. They can comfort themselves with the fact that those at the bottom are better off. Maybe their earnings will improve in later life. For many, however, wage compression brings only the realisation that the trappings of a middle-class life—such as a degree, a profession or a job saving turtles—are insufficient compensation for a salary that places them on the lowest rung. That is not where they expected to be.