Government urged not to ‘backslide’ on National Living Wage

The UK government should stick to its policy on the ?National Living Wage? (NLW), a think-tank said on Wednesday.

The Resolution Foundation warned that limiting planned increases to the hourly rate could leave some full-time workers up to ?1,000 a year worse off by 2020 - with women, the young and older workers most likely to lose out.

More than six million workers are expected to benefit from higher wages as a result of future rises in the NLW.

In early August, 21 trade associations wrote a joint letter to the new business secretary, Greg Clark, asking him to ?exercise caution? on the rate at which the living wage is set to rise, because of ?economic uncertainties the country faces? after the vote to leave the European Union.

Commenting on this, the think-tank said that such calls are understandable given the challenge of a higher wage floor for some businesses. But it argued that the in-built flexibility of the NLW - which automatically adjusts to economic shifts by being pegged to typical hourly pay ? means that there is no need to water down the policy.

The Low Pay Commission will meet in October to decide its recommendation for next year?s NLW increase.

A new analysis by the Resolution Foundation, based on the latest summary of independent economic forecasts published by the Treasury, shows that the NLW is currently on track to rise to around ?8.70 in 2020.

The analysis also shows that if the government were to scale back its ambition over the next four years - for example by raising the NLW at a similar pace to the recent minimum wage increases applied after the 2008 financial crisis - the annual pay of a full-time worker on the NLW would be around ?1,000 lower by 2020, relative to current plans. If there were no further increases relative to average hourly pay, low paid workers would lose as much as ?1,500 from their prospective annual pay.

Around one in five women and one in five workers aged 26-30 would lose out from any backsliding on the National Living Wage, as would over a quarter of workers aged 66 and over, the Foundation argued.

Conor D?Arcy, policy analyst at the Resolution Foundation, said:

?The National Living Wage is a hugely popular policy that is set to deliver a pay rise to six million of Britain?s lowest paid workers and play a pivotal role in the Prime Minister?s vision for an economy that works for everyone, not just the privileged few.

?Understandably some businesses are unhappy about a higher minimum wage, particularly amid the post-referendum uncertainty. But backsliding on the government commitment is unnecessary given the in-built flexibility of the policy to adjust to changing economic circumstances. It would also be costly for millions of low paid workers, so the Prime Minister should stick to her guns.?