The future of minimum wages

18 November 2019

With the general election just around the corner, the Institute for Fiscal Studies (IFS) has published an article that addresses the key findings relating to proposed increases to the minimum wage that political parties are discussing.

Both Labour and the Conservatives have pledged to substantially uplift the minimum wage figure if they are elected in December. Labour plans to introduce a £10 minimum wage in 2020 for all employees aged 16 plus. The Conservatives have promised to increase the National Living Wage (NLW) to two-thirds of median hourly wages by 2024, which will be available to all staff aged 21 and above. Both parties understand the importance of minimum wages and know that an increase will raise living standards for those who are on the lower end of the earning scale.

Labour’s proposal would mean that minimum wage is uplifted by 17% on current plans for those aged 25 and over, with a 26% increase for 21 to 24-year olds. 18 to 20-year olds would benefit from a 58% increase whilst 16- and 17-year olds would see a 123% increase. Plans by the Conservatives would mean a 7% increase for those aged 25 and above, with a 16% uplift to the minimum wage for those aged 21 to 24.

Figures demonstrate that approximately 1.9 million employees over the age of 21 are paid at or below the minimum wage at present. This is due to increase to roughly 2.3 million staff by 2020. Conservative policies would see this figure double to around 4.3 million staff, and under Labour, this number would treble to 6.5 million employees by 2020.

Those who work part-time, who live in the North of England or Wales and women would be affected most. Almost a third of women, half of part-time workers and 30% of those who live in the north or Wales would be impacted by Labour’s proposals to increase the minimum wage to £10 and to extend it to all of those aged 16 or over. Employees in the hospitality sector would reap the benefits of Conservative plans relating to minimum wage, with more than half of the staff in that sector being affected. Two-thirds of these employees would benefit from Labour’s intentions.

The article notes that there is clearly a good case for increases to the minimum wage as it helps those that are low-paid with relatively minimal impact on employment or hours of work. Studies that explored the effect of the post-2015 National Living Wage have shown this but the findings and evidence are still tentative at this point. It does also state that caution needs to be taken in relation to the minimum wage as if it isn’t done properly, it could actually end up negatively affecting the very people that it intends to help.

 


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