The number of employees in low pay fell from 5.4 million in 2015 to 5.1 million in 2016—the biggest fall in 40 yearsby Conor D'Arcy / October 19, 2017 / Leave a comment
The difference between the National Living Wage and National Minimum Wage
The latest chapter in the British labour market’s Jekyll and Hyde story was published this week. New data on jobs, pay and inflation continued the plot of recent months: an impressively high employment rate twinned with woeful wage growth that’s unable to keep up with prices.
But for one group at least, recent developments have been mostly positive. The National Living Wage (NLW) has meant the pay of the lowest earners has outpaced both typical wages and inflation. Whether this will be enough to deal with one of the ugliest sides of the UK’s economy—its reliance on low-paying, low-skilled work—remains to be seen.
What’s clear is that, for the first time this century, the NLW has put the first structural dent in low pay. The number of employees in low pay fell from 5.4 million in 2015 to 5.1 million in 2016—the biggest fall in 40 years. After decades of inaction, this is real progress. And it’s all the more impressive given the complaints it’s drawn from both ends of the political spectrum. Some said it would be a “jobs-killer” and have called for it to be scrapped, while others have called it a con, that’s not nearly high enough. The evidence to date suggests the NLW is striking the desired balance. If you ever want evidence that good policy making can make a massive difference to people’s lives, this is it.
That doesn’t mean government or the Low Pay Commission—the independent body tasked with monitoring the NLW’s impact—can be complacent. Their oversight role will be all the more important in coming years. The NLW is set to continue its rapid ascent up until 2020, by which time it will affect around one in seven employees. It goes without saying that at some point, ever higher minimum wages will do more harm than good. Identifying that crossover point is easier said than done however.
Adjusting to the National Living Wage needn’t be reactive, after the evidence emerges. There is much that business and government could do now to make a higher minimum wage easier to implement.
“At some point, ever higher minimum wages will do more harm than good—but identifying that crossover point is easier said than done”
The first step would be…