HM Treasury issues a review of international evidence in relation to the impacts of minimum wage
06 November 2019
HM Treasury has published documentation that compiles research conducted by Professor Arindrajit Dube in relation to the international effects of minimum wages and how the findings could factor into UK policy on the matter.
The independent review, commissioned by the government, concludes that to consider more ambitious increases to the National Living Wage (NLW) would not be detrimental to rates of employment. The government aimed for the uplifts to result in the NLW being the equivalent of 60% to two-thirds of median hourly earnings. The study found that even the most ambitious of policies did not have any substantial effect on employment but did mean that the earnings of low paid workers were significantly higher.
There is a cautionary note to the review, however, which suggests that there should be procedures in place so that the Low Pay Commission (LPC) can recalculate the NLW in the event of unforeseen circumstances which could be counterproductive to increasing the NLW or if the increase to the NLW started to have any undesirable effects on wider society. The review urged the government to assess its knowledge base and the quality of data used when assessing the impacts of minimum wage.
The LPC also published two separate reports on this subject matter and one related to The National Living Wage Beyond 2020. This report contains the guidance that was provided to the government in relation to abolishing low pay in the UK whilst maintaining levels of employment. The other report was entitled A Review of the Youth Rates of the National Minimum Wage and this contains evidence relating to why the National Living Wage should be accessible to everybody from the age of 21, and not just to those over the age of 25, in line with how it is currently paid.
CIPP comment
We welcome the cautionary note ‘that there should be procedures in place so that the Low Pay Commission (LPC) can recalculate the NLW in the event of unforeseen circumstances which could be counterproductive to increasing the NLW or if the increase to the NLW started to have any undesirable effects on wider society.’
We look forward also to reading the Low Pay Commission 2019 Annual Report which has been the latest casualty to Election Purdah which has caused a delay to publication.
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