National Living Wage comes into force

Posted on 09 Apr 2016 and read 1146 times
National Living Wage comes into forceThe new National Living Wage (NLW) came into effect last Friday, raising the pay of minimum-wage workers aged over 25 from £6.70/hr to £7.20/hr (it is due to reach about £9/hr by 2020).

A total of 4.5 million people will benefit from this increase, and Skills Minister Nick Boles claimed last week that it is “one of the biggest increases in the legal minimum wage that any government has done in the western world in living memory”.

The Conservatives opposed the introduction of the minimum wage in 1998, claiming that it would lead to job losses, but Mr Boles said his party had been wrong to do so. He added: “We bring to it the zeal of converts.”

According to The Financial Times Big Mac Index, the UK’s minimum wage is already “relatively generous” by international standards. At £6.70/hr, a minimum-wage worker in the UK would have to work 26min to buy a Big Mac.

That is better than the USA (41 min) and Japan (32min), similar to Ireland and Germany, but worse than Australia and Denmark (18min and 16min respectively). If the UK brought in its £9/hr target today, a minimum-wage worker could buy a Big Mac after 18min.

Richard Dickens, an economics professor at Sussex University and a member of the Government-led Low Pay Commission (pictured), said: “The minimum wage has never been so popular, but how far can you push it? We’re going into uncharted waters and we just don’t really know. In some ways it’s a social experiment.

"The big question is whether the UK can maintain its strong employment record — particularly for the lowest-skilled workers, who are about to become more expensive to employ.”

Andrew Hilton, director of the Centre for the Study of Financial Innovation, predicts that the policy will be “devastating” for entry-level and low-skilled jobs.

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