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Macro Effects of a Higher UK Minimum Wage

Geoff Riley

15th May 2026

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A higher minimum wage boosts aggregate demand through increased disposable income for low-earners. However, it risks cost-push inflation as firms pass on higher labor costs. While it incentivises productivity via automation, it may squeeze margins in labour-intensive sectors, potentially requiring higher interest rates to manage inflationary pressures.

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Geoff Riley

Geoff Riley FRSA has been teaching Economics for nearly forty years. He has over twenty years experience as Head of Economics at leading schools. He writes extensively and is a contributor and presenter on CPD and Revision conferences in the UK and overseas.

@tutor2uGeoff

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