Mimicking the late Steve Jobs’ “…and there’s one last thing” announcements at Apple Worldwide Developers’ Conferences, Chancellor George Osborne delayed the announcement the implementation of a compulsory national living wage (NLW) until near the end of his Summer Budget speech.
Perhaps the easiest way of understanding the new arrangements is that, in effect, they boil down to a hike in the national minimum wage rates for workers aged over 25 but little else.
The NMW is due to rise from the current £6.50 per hour to £6.70 per hour in October. This increase broadly reflects those applied in recent years (2010 £5.93; 2011 £6.08; 2012 £6.19; 2013 £6.31). The new rate of £7.20 per hour will therefore represent an increase of 50p per hour when implemented. Of course the Government’s strategy is to seek to transfer the pay burden for low paid employees from the Government to employers, as demonstrated by the corresponding reductions in benefits and, in particular, tax credits.
It is intended that the living wage will increase to £9.00 per hour in 2020. In fact, this is not too far out of line with what had been forecast had the NMW been retained and increased in accordance with recommendations (as now) from the Low Pay Commission. The Office for Budget Responsibility has suggested that the increase is likely to result in the direct loss of about 60,000 jobs. However, Mr Osborne pointed out that the cost of the increase equates to approximately 1% of corporate profits and he is cutting corporation tax from the current 20% to 19% in 2017 and 18% in 2020. It should also be noted that the OBR’s estimates rely on growth in productivity in low pay sectors which has, in fact, fallen below expectations in recent years.
It is important to distinguish the new NLW from the existing living wage set by the Living Wage Foundation which is already £9.15 in London and £7.80 elsewhere.Details