Both main parties are right to propose plans for an even higher wage floor, independent think tank the Resolution Foundation said, as it released analysis showing that minimum wage increases since 2015 delivered a £3 billion pay boost to low-paid workers last year.

Ain’t no minimum high enough: Minimum wage policy in the 2019 General Election can be found at https://www.resolutionfoundation.org/publications/aint-no-minimum-high-enough.

It examines the impact of the minimum wage since its introduction in 1999 and the main parties’ plans for it in the next Parliament, including the opportunities and risks associated with a significantly higher minimum wage.

Economic Analyst at the Resolution Foundation, Nye Cominetti, said: “The two main parties fought tooth and nail over whether a new minimum wage would boost pay or kill jobs in the run up to the 1997 election. Now, 20 years on from its introduction, the electoral battle over the minimum wage has completely changed. Both main parties are promising to deliver one of the highest minimum wages in the world”.

However, he went on, politicians need to recognise that “the higher we go, the greater the risks” — particularly for younger workers.

In this group, around a third of 21 to 24 year-olds currently earn less than the Conservatives’ target minimum wage rate, while half earn less than Labour’s proposed £10 minimum wage.

Promises, promises…

The Conservatives have set out plans to raise the National Living Wage (NLW) to £10.50 by 2024 — a level that would effectively end low pay (set at two-thirds of typical hourly pay).

They also plan to gradually reduce the age threshold for this higher wage floor to those aged 21 and over.

Meanwhile, the think tank points out, the Labour Party wants to go even further and introduce a £10 minimum wage to all workers aged 16 and over in 2020, calling this a mandatory real Living Wage.

That will mean, the Resolution Foundation explains, that the UK labour market would go from having one of the biggest low pay problems of any advanced economy (over 20% of workers were low-paid as recently as 2014) to one where low pay was virtually eliminated (measured in hourly pay), in less than a decade.

Its report concludes that whichever party forms the next Government should move cautiously toward meeting its target and be prepared to adjust the wage floor in light of changing economic conditions.

Comment by Andy Willis, Head of Legal at Croner

While the talk of increasing National Minimum Wage (NMW) rates will be music to the ears of staff, minimum wage employers may feel less enthused.

After all, many small employers already struggle with tight profit margins and these proposed increases will only place an additional strain on their payroll capacity. It is also worth considering that drastic raises to the NMW may have a counterproductive impact on staff, especially those who work on zero-hours’ contracts, as the added financial cost may make employers more reluctant to arrange shifts unless necessary.

Despite these concerns, it would appear that considerable NMW increases will be a key focus of the UK’s next Government, meaning employers should keep a close eye on future developments to ensure they comply with any new requirements.

Last reviewed 28 November 2019