Living wage rise not expected to reach target

Posted by Simon Hadley in Personal Finance on 13 October 2016 - Simon is a Credit Analyst at checkmyfile.

In the aftermath of the latest sterling plunge – the most severe drop recorded since the Brexit vote – the impact of leaving the EU is anticipated to affect those on the national living wage.

Although Theresa May will not trigger article 50 of the Lisbon Treaty until March next year, the Resolution Foundation forecasts that weekly pay growth will rise to £7.50 an hour rather than the initial £7.60 increase, as originally predicted.

Should this materialise, up to four million workers will still see annual rises of up to £600. At present, the national living wage stands at £7.20 an hour for workers aged 25 and over.

“While there is much uncertainty over Britain’s long-term economic outlook, most economists agree that wage growth in the next few years is likely to be weaker than expected prior to the referendum, “says Conor D’Arcy of the Resolution Foundation.

“That means we’re unlikely to see the £9 national living wage that George Osborne talked about in [this] parliament.”

Philip Hammond is set to present his autumn statement on 23 November, where it is expected that the uncertainty surrounding the living wage will be addressed.

The Resolution Foundation also estimates that the long-term impact on minimum wage workers could wipe £780 a year off annual wages by 2020, if the national wage increases by £8.60 rather the £9 rise as claimed by George Osborne last year.

“With over four million workers set to be earning the new legal minimum by 2020, ministers need to work closely with employers to ensure that they’re not just able to pay the legal minimum, but can offer staff a route out of low pay altogether,” adds Mr D’Arcy.

Everton Football Club have been the first high-profile business to offer a pay rise to its lowest-paid staff irrespective of any future uncertainty.

“It’s extremely important to us that we treat all of our employees well, rewarding people fairly in terms of their pay is crucial to this, but only one element of our strategy which has also seen us review our grading structure, launch a new rewards and recognition programme, and introduce greater flexibility to our employee benefits scheme,” says Dr Denise Barrett-Baxendale of Everton FC.

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