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ELI5: Why should a minimum wage worker care about GDP growth? (self.explainlikeimfive)

submitted 1 month ago by Tamo240 to c/[email protected]

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Following the budget announcement in the UK, why is the media obsessed with the predicted growth being 0.2% lower, instead of applauding the much needed investment in our public services? Does it really matter that much?

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[–] [email protected] 30 points 1 month ago (1 children)

The tax income of the government is a percentage of the GDP, and taxes are in the end where money for investments into infrastructure and other stuff comes from.

If investments must be done regardless, it means the government has to borrow money and pay it back plus interest in the future, which again is paid for with tax money.

So if the GDP sinks, future tax income must increase to balance it - either through an increase in GDP down the road, or through higher taxes.

A reduction in GDP also means that either local consumers aren't buying as much, or exports are shrinking, both of which are negative indicators for the local labour market and lead to layoffs.

[–] [email protected] 1 points 1 month ago (1 children)

It's important to note that most of the money borrowed by the US govt is in the form of bonds to its own citizens, and the interest paid is to those citizens.

[–] [email protected] 6 points 1 month ago (1 children)

The OP is talking about the UK though.

[–] [email protected] 3 points 1 month ago

Good point and I missed that in the original post.

It does appear to be a similar situation with the UK though, only with pensions and other funds.

[–] [email protected] 7 points 1 month ago* (last edited 1 month ago) (1 children)

So... Regardless of county, I would say minimum wage workers should not worry about the economy. Instead put that energy into finding a career path of some sort.

That's not me bashing minimum wage workers, it's just ... the best thing a minimum wage worker can do to improve their circumstance.

Worrying about the GDP or stocks or anything else isn't particularly helpful, especially if you're living paycheck to paycheck (which at least in the US where I live, most minimum wage workers are).

Even for middle and upper middle class, worrying about GDP growth and how the stock market is doing day to day (unless you're on the verge of retirement and trying to time cashing out stocks) is not a particularly helpful exercise.

Maybe it has some abstract effect on what social services you get or whether your employer survives another year... but you can probably find better indicators of that (e.g. in the days where computers were reducing paper usage, it should've been increasingly obvious that working at the paper mill probably wasn't going to be a great long term plan).

[–] [email protected] 12 points 1 month ago (1 children)

Individualism to it's core. The only reason people with minimum wage are struggling is because rich white guys always told them to not worry about it, just try to find a better job. ( While worrying about stagnating minimum wages groth, privatizing government programs, inflating bubbles so they can pop and deregulating protections)

Nah, don't worry about it.

[–] [email protected] 1 points 1 month ago* (last edited 1 month ago)

People typically aren't stuck on minimum wage because the powers that be won't let them have a decent wage. Most adults are not on minimum wage ( in the US, less than 2% as of 2022; in the UK, low pay accounts for less than 4% as of 2024 ).

There's something to be said for the rich taking advantage of folks, but ... bothering worrying about abstract rich guy metrics like making the GDP go up is not going to help anyone get out of their situation.

Sure, focus on other aspects of politics like making education affordable, strengthening unions, etc things that will help you achieve your goals or help you once you've achieved your goals. However, there's a lot one can directly do to address their situation that's a lot less abstract than "vote for a representative, to write a bill, to potentially help you, to possibly get passed by your legislature, and possibly get passed by your executive branch (or your equivalent process)."

... and even then that latter concept has little to do with "why someone on minimum wage should pay attention to the GDP."

[–] [email protected] 2 points 1 month ago (1 children)

Adding to what everyone else said, while GDP growth in one year doesn't really matter much except if it's really big or negative (i.e. shrinking economy) over time it can lead to big differences between different economies. No or little GDP growth is what we call a stagnant economy and for what that looks like in a first world country take a look at Japan. In short, though, it's not a fun time.

[–] Tamo240 2 points 1 month ago

Makes sense, but to me going from 1.5% to 1.3% on a prediction for 3 years in the future seems like a pretty insignificant difference, especially since it will probably change between now and then.

£22B for the NHS is the best news I've heard in a while, and even then it is only barely keeping it in line with previous investment as a % of GDP. This investment is sorely needed so if taxes have to go up to pay for it they have to go up. If we want growth rejoin the EU and then our taxes can come down again, but none of the major parties are willing to have that conversation.