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30-05-2019 09:16 | Read 198 times

End of low pay in sight as living wage is raised, think tank says

The proportion of workers on low wages has fallen to its weakest level since 1980 and low pay could be eliminated by the middle of the next decade, an equality think tank has suggested.

End of low pay in sight as living wage is raised, think tank says

The Resolution Foundation said that 17.1 per cent of workers in Britain were low-paid, which is defined as having wages below two thirds of median hourly earnings.

However, it said in a new report that this proportion could fall to zero by the middle of the 2020s as long as the government continued with incremental rises to the national living wage after the last of the increases proposed by George Osborne, the former chancellor, came into effect in 2020.

Wages for the lowest-paid in Britain have been rising steadily for two decades, but until recently one in every five British workers was low-paid.

When the national minimum wage was introduced in 1999, it was set at 45 per cent of median pay, rising to 52 per cent by 2016, when the Conservatives implemented the national living wage for workers aged over 25. This will rise to 60 per cent of median hourly earnings, or about £8.67, by 2020. The rate is set at present at £8.21.

 

The introduction of the national living wage in April 2016 helped to lift hundreds of thousands of people out of the low-wage bracket. The number of low-paid workers across Britain fell by almost 200,000 last year. This included more than 130,000 women and 120,000 young people aged 21 to 30, even though under-25s are not legally entitled to the national living wage.

The Resolution Foundation noted that “ramping-up has taken place without any significant negative impacts on jobs”. Its report said: “UK employment is at a record high and recent jobs growth has been fastest among groups who are disproportionately likely to be on the minimum wage, such as those with fewer qualifications.”

Mr Osborne decided to raise the national living wage to 60 per cent of median hourly earnings by 2020. However, Philip Hammond, his successor as chancellor, is said to be considering a more ambitious target of 66 per cent, taking workers above the official low-pay threshold.

The Resolution Foundation said that in order to eliminate low pay, increases to the national living wage would need to remain above the average since the minimum wage was introduced in 1999, although they could be slower than the rapid increases of recent years.

However, it noted that rises to the national living wage ought to be approached with caution, “given that we do not know at what level employment effects might begin to kick in”.

Nye Cominetti, an analyst at the Resolution Foundation, said: “An ambitious but cautious approach that saw the national living wage continue to rise after 2020 at a faster pace than the minimum wage has increased in its 20-year history would put Britain on course to eliminate low pay in the middle of the 2020s, while still giving the government room for manoeuvre if economic conditions change.”

The Institute of Economic Affairs, the free market think tank, warned that although successive increases in the minimum wages had not had a noticeable effect on employment, “it cannot be assumed that further sharp increases won’t affect jobs”.

Len Shackleton, editorial research fellow at the IEA, said: “We should not put the benefits of the UK’s flexible labour market at risk, particularly at this time of uncertainty.”

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