Millions of Britain’s lowest paid workers get a pay rise on Friday because the
new national living wage becomes compulsory as of April 1.
In July last year, UK Chancellor George Osborne said the government would scrap the National Minimum Wage — £6.50 an hour for workers — for a new “National Living Wage” of £7.20 an hour for workers over the age of 25. It comes into force next April and by 2020, the National Living Wage should rise to £9.
The National Living Wage is intended to make sure people are paid enough to have a “normal” standard of living. For example, a full-time waitress should be able to live off her low wages and afford rent, food, transport, and bills without having to take a second job or an exceptional amount of extra hours.
The government estimated that it should affect 9 million workers.
You’d think unions would be happy for their workers to get higher pay but they’re not. In fact, one of Britain’s most prominent unions thinks it is still unfair.
“Britain desperately needs a pay rise, and this increase is good news for those aged 25 or older,” said TUC general secretary Frances O’Grady in an emailed statement.
“But the Government must ensure that younger workers are not left behind – 21 to 24-year-olds will not be seeing an increase. This is not fair. Future wage increases must narrow the pay gap between old and young.”
Meanwhile, businesses aren’t happy either. The British Chambers of Commerce represents thousands of businesses across Britain, which employ around 5 million workers.
Dr Adam Marshall, Acting Director General of the BCC, said in a statement (emphasis ours):
As a member of the Living Wage Commission, I saw first-hand how a decent wage can transform people’s lives, as well as their performance at work.
So we should celebrate every business that can, and does, make the commitment to pay each and every employee a living wage. That includes a significant majority of Chamber of Commerce members all across the UK.
However, the government’s new National Living Wage will apply a ratchet effect to all companies’ pay bills, and sits alongside a raft of other high employment-related costs.
It is unclear whether the NLW will spur productivity or strengthen businesses, communities or the economy as a whole. While many companies have the ability to increase pay, others will struggle to do so alongside pensions auto-enrolment, the apprenticeship levy, employer National Insurance contributions, and other up-front costs. Some will have to divert money from training and investment to increase pay, which could hurt their productivity. Others may stop hiring altogether.
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