News | Published November 15 2019

IFS says minimum wage rise will impact millions

The Institute for Fiscal Studies has said that plans outlined by both Labour and the Conservatives to raise the minimum wage would increase pay for millions of people.

The plans would also double the current number of people paid wages that are set by the government.

It has long been argued that minimum wage levels are insufficient, but the author of the IFS report recommended any raise should be “careful and incremental”.

The National Living Wage set by the government pays £8.21 per hour for workers aged 25 and over, with the National Minimum Wage set at £7.70 per hour for 21-24-year-olds and £6.15 for the 18-20 age group.

Workers under the age of 18 are paid a minimum hourly wage of £4.35, or even as low as £3.90 if they are undertaking an apprenticeship.

The Tories intend to reduce the age limit for the National Living Wage to 21 and increase pay to £10.39 per hour by the year 2024, which would see 4.4 million paid the higher rate compared to 1.9 million at present.

Labour’s plans include a £10 minimum wage for all employees 16 and over from 2020, which would see 6.5 million individuals on the highest minimum wage rate.

Under Labour’s proposals, 49 per cent of 21-24-year-old workers would receive the wage, with 82 per cent of 18-20-year-olds and 94 per cent of 16-17-year-olds also benefitting.

IFS analysis of the Conservatives’ plan would see 36 per cent of 21-24-year-olds in employment granted the wage by the year 2024.

The IFS did warn that sudden hikes in wages for young workers could deter employers and culminate in a struggle to find jobs, however, the point at which a new minimum wage would affect employment remains unknown.

Xiaowei Xu, who put together the report, said: "Recent minimum wage rises have boosted earnings and there is little evidence that they have damaged employment, so there may well be scope for further increases.

"But both the Conservatives' and Labour's plans would take us into uncharted waters.

"That calls for a careful and incremental process to ensure that, if the employment prospects of the low-paid do start to be impacted, policymakers can change course before it is too late.”

The IFS added that Labour’s minimum wage policy would impact 30 per cent of workers’ wages in the private sector, compared to 20 per cent under the Conservatives.

The hospitality, catering, retail and agriculture sectors would be the most impacted according to the research, with 40 per cent of workers aged 21 and above on minimum wage, compared to under ten per cent in the finance, communication, public administration and defence sectors.

The minimum wage plan under Labour would also impact 30 per cent of women workers, with just over 20 per cent set to benefit from the proposals set out by the Tories.

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Authored by

Scott Challinor
Business Editor
November 15 2019

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