BRITAIN’S economic recovery is now so far advanced that economists are worrying about the next recession. Yet despite six years of economic growth, inflation-adjusted average earnings are still 4% lower than they were before the financial crisis hit, the same measly performance that other rich countries have seen. Boosting the minimum wage may seem one solution.

From April 1st Britain’s minimum wage is to be rebranded as the “national living wage” (NLW) and made more generous. The legal wage floor for those aged 25 or older rises from £6.70 ($9.60) an hour to £7.20; by 2020 it will be worth roughly £9 an hour. Touted as a measure to help the lowest paid, whom globalisation has not treated kindly, Britain’s new NLW is being watched closely by other countries. Unfortunately, this is no policy to help the poor.

In recent years Britain’s minimum wage has become more generous. Following its introduction in 1999, it was worth about 45% of median earnings. By 2020 the NLW is expected to rise to 60%.

It is small wonder that plenty of people will be affected. About 1.8m employees will be paid at a higher rate in 2016 because of the NLW and in 2020 around 3m will be. By then Britain’s wage floor may be one of the most munificent in the rich world as a percentage of median earnings (see chart), raising employers’ wage costs by £4 billion. The government hopes that companies will bear this extra burden. In recent years they have underspent on training, faster computers and better machinery, the argument goes, dragging down growth in productivity (ie, the amount a worker produces per hour) and with it wages. Indeed, had earnings kept rising at their growth rate before the crisis they would now be 25% higher than they are. The NLW may force firms to make up the productivity deficit. “Requiring a pay increase can prompt employers to make the investments that they otherwise do not necessarily feel that they would need to make,” Nick Boles, the skills minister, said recently. The circumstantial evidence looks encouraging. In the Netherlands, where the minimum wage is higher than in Britain, labour productivity is 20% greater. The economic evidence is less promising. Some research does suggest that Britain’s national minimum wage, introduced in 1999, prompted employers to improve training. This effect is likely to be small, though; it is already in companies’ interest to squeeze as much out of their workers as they can. Moreover, if firms respond to the NLW by boosting capital investment they may end up employing fewer people. Mr Boles is fulsome in his praise for French supermarkets, for instance: prices on French shelves are often marked on electronic displays so that, unlike in Britain, they do not need to be updated manually. Such gadgets are useful in a country where the minimum wage and other employment costs are high (French unemployment is twice Britain’s rate). The independent Office for Budget Responsibility (OBR) expects the NLW to raise hourly productivity by just 0.3 percentage points by 2020 and to lower working hours by 4m a week (about 0.2%).

In industries where making big capital investments is tricky, bosses will have to try a different tack. Gentleman’s clubs in central London are raising membership fees well above the inflation rate, telling their monied clientele that the higher minimum wage leaves them no choice. Other firms, though, have less latitude with prices. Some employers will turn to under-25s, who are not covered by the NLW, instead of older workers.

In industries such as cleaning (in which 30% of jobs pay at or below the minimum wage) and hospitality (where 25% do) hiring is likely to slow. Care homes are already struggling, thanks to cuts in government funding, and some have indicated that they will go bust. The OBR thinks the NLW could increase unemployment by 20,000-120,000 people by 2020. If that happened today it would raise the jobless rate, now 5.1%, by as much as 0.4 percentage points. As less productive workers drop out of the market, average productivity will rise—but this is a statistical trick rather than something to be welcomed.

Whatever the overall impact of the NLW, its relative effects will be important. Those who lose their jobs because of the higher NLW will mostly be poor and low skilled. Many of those on the minimum wage are second earners in higher-income families, whereas many poor Britons do not work at all. According to the Resolution Foundation, a think-tank, a household in the seventh income decile (ie, nearer the richest) will benefit three times as much as someone in the bottom decile.

The NLW may also have more impact in some places than in others. Data from Adzuna, a job-search website, show that in recent weeks just 2% of positions in Oxford have offered salaries that are less than the NLW, compared with more than 7% of jobs advertised in Salford and Sunderland. Areas already struggling with high unemployment may see their situation worsen.

The distributional effects of the NLW are all the more concerning given other policy measures. The government’s pledge to shave £12 billion from the working-age welfare bill by 2020 will hit the poorest hard. Even if the £4 billion in extra pay under the NLW went to the very same people, it could not offset these welfare cuts.

According to calculations by the Institute for Fiscal Studies, a think-tank, a household in the tenth percentile will see its income stagnate from now until 2020, whereas one in the ninetieth will see a 12% rise. An increase in the minimum wage will bring a welcome pay boost to millions, but those at the bottom are set to keep struggling in the coming years.