National living wage: 'I'll spend the pay rise on my son'

Single mum Chloe Brown says she will spend the extra cash on her son, Oliver

Chloe Brown doesn't have to think when asked what she will do when she gets her pay rise to reflect the new so-called living wage.

"I'm going to spend it on Oliver," she says.

Chloe is a single parent who is juggling work as a carer at a nursing home in Sheffield and looking after Oliver, aged three.

She currently earns £6.81 an hour and works eighteen hours a week.

"It's tough having childcare and bills to pay for and making sure that he's fed and warm. Every penny is accounted for."

She reckons she'll earn an extra £30 a month when her pay rises to £7.20 an hour on 1 April.

"It'll make a big difference to me and to Oliver, It can't come soon enough", she tells me.

Chloe says she couldn't work without her local nursery. She's able to drop Oliver off at 7:30am, enabling her to get to work on time.

'Big difference'

The Firth Park Little Treasures Nursery is a small but busy facility, tucked away on the site of a local church.

When we visit, Oliver runs off to give his care worker, Carly Fox, a cuddle.

She too is about to get a pay rise. Aged 31, Carly works full time on £6.70 an hour, the current national minimum wage. She could be £900 better off over the next year.

"It will make quite a big difference. I'm still going to struggle but it will be a lot better than what it is," she says.

"Financially it means I'll be able to sort myself out with my debts and hopefully be able to start treating myself to a few things extra"

Chloe and Carly are just two of the estimated 1.3 million workers over 25 who will directly benefit from the new legal wage floor, dubbed the national living wage (NLW) when Chancellor George Osborne made his surprise announcement last summer.

It's the biggest shift to the legal minimum wage in years.

The NLW will rise, year-on-year until 2020 when it is projected to be more than £9 an hour.

By then, some six million employees are likely to have received some increase in their pay as a result.

"I'm still going to struggle but it will be a lot better," says nursery worker Carly Fox

'I will close'

But nursery owner, Anita Bingham, is worrying how to pay for it.

Five of her staff, including Carly, will qualify for the new rate.

"It's a lot of money to a small business like mine that's just set up. I am going to struggle," she says.

Anita says she can't put up fees because most of her parents are entitled to 15 hours of free childcare which is paid by the government.

"I can't get rid of staff either because I need the ratios for the amount of children that we've got - so it's go to the toys and all the equipment we use." These will have to be cut back on.

I ask her about the prospect of paying out more than £9 an hour by 2020.

Her nursery could close if the minimum wage eventually reaches £9 an hour, says owner Anita Bingham

"I'm dreading that, it's going to be a big stretch. I will close, it's as simple as that unless the government decides to put up the fees and I can rethink it," she says.

She wants to pay her staff more, but how to make the sums add up? That's the dilemma facing thousands of other businesses, especially small ones. Anita only earns the minimum wage herself.

Business rate relief

No one can say for sure how this big policy change will play out.

The Resolution Foundation reckons almost a third of Sheffield's workers will benefit from the new living wage over the next four years, a higher proportion of employees than any other major UK city.

But Sheffield wants to go even further. Its council is already paying workers £8.25 an hour, the level set by the Living Wage Foundation.

In an eye catching move, it recently announced business rate relief for other employers who do the same.

Almost a third of Sheffield's workers will benefit from the new living wage

Professor of regional studies at Sheffield University, Gordon Dabinett, says £7.20 an hour is too low to survive.

"Our studies have shown that it's not enough to live on. And therefore if they're not earning enough money, that leads to crisis in the household in a family and that leads to further problems such as debt and other associated problems," he says.

"There are always unintended consequences. If jobs are lost immediately in some sectors or in some companies then I'm quite confident they'll be regained later.

"Obviously it doesn't help individuals faced with those hard decisions and businesses faced with those particular circumstances but all the evidence from studies in America at the moment show that the introduction of a living wage has long term economic benefits," says Prof Dabinett.

"We think for a fair city, people should be given a fair wage."

Few would disagree with that but its clear there is no easy route to lifting millions of workers out of low pay.