1 in 3 Workers to Benefit from Minimum Wage Increase


March 2016

1 in 3 Workers to Benefit from Minimum Wage Increase

The Resolution Foundation, a think tank focusing on wages and living standards has published research showing how George Osborne’s introduction of the increased living wage will affect workers across the UK.

“Britain deserves a pay rise, and Britain is getting a pay rise” George Osborne said emphatically during his budget last Summer in which he announced the introduction of the National Living Wage which is set to increase gradually until it reaches £9 per hour in 2020.

The increased living wage will be introduced on Friday 1st April and will mean that for workers aged 25 and over, they must be paid a minimum of £7.20 an hour. This will mean that the National Living Wage (NLW) will be 50p an hour higher than the National Minimum Wage (NMW) which will still apply to workers aged between 21 and 24. The minimum wage for workers aged 18 to 20 is currently £5.30.

The Resolution Foundation calculated that those currently being paid minimum wage will ultimately see their wages increase at a pace 50% higher than those on average wages over the next few years.

The Resolution Foundation identified ten hotspots where average wages are particularly low (and so where the NLW would have a particularly large effect) and found that in them, 30% of all workers will benefit from the introduction of the National Living Wage.

Of these ten areas, the Devon town of Torridge contains the most people who will benefit from the NLW, with 35% of workers there on track to get a pay rise once the changes come into effect this week. Other areas in the top ten include Rossendale, Woking, Castle Point, Oadby and Wigston, Forest Heath, Mansfield, West Somerset, Breckland and Rother.

The set of ten areas where workers will benefit the least was made up overwhelmingly of towns and boroughs in London and Greater London, with Mole Valley and Runnymede in Surrey, and Cambridgeshire being the only areas outside of the capital to be counted. In the City of London, just 3% of workers will benefit from the NLW.

In terms of big city areas, Sheffield will be the most benefitted, with 22% of the city’s workers expected to experience a pay rise when the changes come in.

In terms of demographics, the Resolution Foundation found that the groups who will benefit the most are women, workers aged 25 to 30, and those who are still in work after the age of 66.

In total, the Resolution Foundation found that 4.5 million of the UK’s workers will benefit from the NLW during this year. The OBR’s figures are a little less optimistic – they estimate that around 1.3 million workers will see their wages go up straight away, and 2.9 million will have a pay rise by 2020.

The OBR do predict though that as those on minimum wage see a pay rise, those on the next level up will eventually see their wages increase as a result in order to maintain similar pay differentials to what we see currently. They estimate that this will mean up to 6 million workers could get a pay bump within the next four years.

They also, however, predict that some 60,000 workers could end up losing their jobs as employers look to offset the losses they make by increasing pay for some.

The Resolution Foundation’s director, Torsten Bell, said: “The national living wage is a hugely ambitious policy with the potential to transform Britain’s low-pay landscape.‎ Up to a third of workers will get a pay rise in [NLW] hotspots, ranging from Canvey Island to eastern Lancashire.

“Britain’s new legal wage floor will be felt throughout the country but its impact will be bigger in some areas than others. Relatively few employees will benefit in high-paying parts of Britain such as the City of London and Camden, reminding us of the need to see more employers sign up to pay the higher voluntary living wage.

“Of course, pay rises don’t come free so employers in some sectors and parts of the country will feel the pressure more than others. That’s why it’s vital that businesses and national, regional and local government make the successful implementation of the new legal minimum a priority.”