The introduction of the National Living Wage is to benefit six million employees across the UK by 2020, according to new research from the Resolution Foundation. The new Living Wage will come into effect in April of next year, introducing a £7.20 hourly rate in place of the current minimum wage for those aged 25 and over.
At present, national minimum wage is £6.50 an hour, due to rise to £6.70 next month. The introduction of the new Living Wage next year and the effects of this in the years that follow up to 2020 are predicted to create a pay increase for nearly a quarter of the UK’s entire employed population. The majority are those who are currently earning minimum wage, or an amount between the current minimum and the new figure, and are set to see their pay increase to the new minimum. However, other employees will benefit from a knock-on effect, as companies increase the pay of those who are already earning more than the minimum in order to maintain the gap between the amount paid to employees in different roles and at different levels. Some 2.8 million are currently being paid at the level that is set to become the minimum when the new Living Wage comes in, and the majority of these are expected to receive a pay rise to maintain the difference between their wages and those of other workers.
By 2020, the average pay increase as a result of the changes is expected to equate to around £1,210 a year. The regions which are predicted to see workers benefit most include Wales, the Midlands, and Yorkshire and the Humber.
Women will benefit more than men from the increase, because the gender pay gap means that more women than men are found in the lower echelons of the nation’s pay scale. Resolution forecasts that roughly 3.7 million women will receive a pay rise compared to around 2.3 million men. According to Resolution’s policy analyst, Conor D’Arcy, “This will have a positive – though modest – effect on the gender pay gap, and will particularly help those working part-time.”
Although the plan to introduce the living wage has generally received support from the majority of quarters, the Confederation of British Industry (CBI) has expressed some reservations, saying that applying politics to the minimum wage was a “gamble.” The Trade Union Centre (TUC) also expressed reservations despite heralding the new wage as “a welcome step forward.”
“Despite the pay gains,” said Frances O’Grady, general secretary of the TUC, “many of the lowest paid workers will still be left poorer overall because of steep cuts to their tax credits.”