By Ashleigh Webber on 4 Nov 2019
According to the independent body that advises the government on minimum wage rates, the increasing the national living wage (NLW) for workers aged 25 and over will only have a significant impact if it is supported by: strong employment, economic growth, increasing pay, productivity growth, the affordability of increases to firms and the quality of jobs for workers.
There is also a case for reassessing the design of the NLW framework so it is able to respond to changing economic circumstances, the LPC’s The National Living Wage Beyond 2020 report says.
In particular, the government’s ambition for the NLW to reach two-thirds of median earnings by 2024 – as pledged by Chancellor Sajid Javid earlier this year and recommended in an independent review by Professor Arindrajit Dube today – is seen as too ambitious.
The LPC says its discretion to depart from a target when making minimum wage recommendations, based on economic evidence, should be safeguarded.
“Ending low pay is a worthy ambition. We hear too often from workers about the debilitating effects of low pay. But we should be under no illusions: a two-thirds target is ambitious and will be very stretching for businesses in low-paying sectors,” it says.
“Equally, a higher NLW target by itself will not end low pay under the most common measures, and will need to be accompanied by a broad slate of supporting policies if the government’s stated aim is to be met.”