Thursday, December 29, 2016

Low Pay Commission estimates National Living Wage helped 6 million people

I previously posted estimates for the number of people whose wages were increased by the introduction of the National Living Wage which were deliberately Conservative with a small "c" and based on those who were previously paid less than the new requirement.

There were 1.6 million people directly affected by the NLW and who received pay rises as a result.

The Low Pay Commission, which among other things was set up to advise the government about what wage legislation should say, estimates that a much larger number - six million people - had their wages raised by the new National Living Wage because the impact "rippled up the pay scale" for workers over the age of 25 as employers and unions increased wages and salaries of people in slightly more skilled jobs than those on the minimum wage in order to maintain differentials. It is estimated that another 3.4 million people received pay rises above the average 3.1% as a result.

The more astute readers will have noticed that this comes to 5 million. It is also estimated that the introduction of the NLW influenced the "going rate" for younger workers not directly covered by it and another million or so younger workers benefitted as a result. The proportion of younger workers paid at least the NLW level rose from 62% to 69%.

So the LPC estimates that this Conservative legislation has given the lowest-paid quarter of the working population a pay rise. In Copeland that could easily mean that 8000 to 9,000 people were helped.

It appears from the Low Pay Commission's research that the boost to the pay of the bottom quartile of workers which they attribute to the NLW has not been offset by reductions in non-pay benefits. They estimate that there may have been a drop in company profits as employers chose to take the hit on their bottom line.

I am not one of those people who think that a decline in profits is a wonderful thing, and one part of the LPC's remit is to watch out for any sign that minimum wage legislation is driving SME's bust, pricing people out of the market, or generating unemployment. It is extremely important to keep an eye on this - there is undoubtedly a level of wages where forcing them higher would give rise to that problem.

I don't believe we have reached that point yet, and what the LPC is telling us is that this legislation has made life better for the least well-off quarter of the working population.

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