Party plans would ‘boost minimum pay for millions’

Plans from the two biggest political parties to raise the minimum wage would boost pay for millions of people, a leading economic research group says.

The move would also double or treble the number of people whose wages are set by government, the Institute for Fiscal Studies (IFS) said.

Some have argued that current minimum wage levels are too low, leaving people in work struggling.

But the report's author warned rises should be "careful and incremental".

At present, the government's National Living Wage pays £8.21 an hour for workers aged 25 and over.

For younger workers, the National Minimum Wage is currently set at £7.70 an hour for 21-24 years olds and £6.15 for those aged 18-20.

Workers aged 16 to 17 can only expect a minimum hourly wage of £4.35, or £3.90 if they are part of an apprenticeship scheme.

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The Conservatives plan to lower the age limit for the National Living Wage to 21 and pay around £10.39 per hour by 2024 (or £9.59 in 2020 prices).

That would increase the numbers on this higher rate to 4.4 million - up from 1.9 million today.

Labour pledges to introduce a £10 minimum wage in 2020 for all employees aged 16 and over. This would benefit an additional 4.6 million employees, taking the total on this rate to 6.5 million.

Under both parties' plans, private sector employees and the youngest workers - who get the lowest salaries - would see the biggest impact, the research found.

The IFS said Labour's proposals suggested 49% of workers aged 21-24, 82% of those aged 18-20, and 94% of those aged 16-17 would be covered by the minimum wage.

Conservative plans suggest the share of 21 to 24-year-old employees affected by the minimum wage would rise from 9% today to 36% by 2024.

The IFS warned that sharply higher wages for young workers may see them struggle to find work, although it conceded that the point at which a minimum wage would affect employment is not known, and that timing was more of a problem than the wage level itself.

"Recent minimum wage rises have boosted earnings and there is little evidence that they have damaged employment, so there may well be scope for further increases," said the report's author, Xiaowei Xu.

"But both the Conservatives' and Labour's plans would take us into uncharted waters.

"That calls for a careful and incremental process to ensure that, if the employment prospects of the low-paid do start to be impacted, policymakers can change course before it is too late.

It said Labour's policy would mean nearly 30% of private sector workers' wages would be set by the state, while the Conservative plans would set 20% of private sector wages.

The research pointed out that of all households in "in-work poverty", only a fifth have someone on the minimum wage, suggesting the number of hours worked is also a factor in raising living standards.

Someone is in in-work poverty when their income falls below the poverty line due to their low income.

The North of England and Wales are the regions most affected, with up to 30% of workers aged 21 or more having their wages covered by the minimum.

Of the industries, hospitality, catering, retail, and agricultural work could all see the most change, with up to 40% of workers aged 21 or more captured by the minimum wage bracket.

For finance, communication, public administration and defence, the figure will stay less than 10%.

Women will be more affected by the plans than men in each party's plan, said the IFS, with more than 30% captured by the wage minimum under Labour's plan, and more than 20% under the Conservative proposal.

The National Living Wage and National Minimum Wage are distinct from the real living wage, which was devised by the Living Wage Foundation charity.

It argues that the government's National Living Wage is not high enough to meet workers' needs and encourages employers to adopt its more generous, independently calculated rate.

Businesses who have signed up to the voluntary scheme pay an hourly rate of £9.30, or £10.75 in London.