A Strong National Living Wage

Paul Sellers writes:

The government’s target of a nine pound minimum wage by 2020 is under threat.

If Theresa May seriously wants to hold the centre ground, she must stick to the target.

When Greg Clark became business secretary in July, he immediately came under pressure to water down and delay the increases to the national living wage.

This came from the usual business figures who have always resented the national living wage.

Their latest attack is a report today from an insolvency practitioner suggesting that more businesses are struggling.

The TUC doesn’t often defend government policy, but in this case we are calling on the PM and the Chancellor to hold their nerve and deliver what was promised by their immediate predecessors.

Ditching the nine pound target would add to uncertainty around pay and policy, at a time when the political signals ought to read ‘business as usual’.

Luckily, it’s not difficult to reach the target by 2020.

Not only does the UK have a record number of people in employment – as the government continually reminds us – but, the number of people employed in low-paid industries has risen faster in the past year than jobs growth elsewhere.

This suggests that businesses have been well able to cope with the current rate of £7.20. It also seems likely that UK businesses could afford a further increase. 

The latest figures (from before the referendum) show corporate profitability running at record levels. 

Large firms can certainly afford to pay more, which could offer a boost in consumer demand for smaller firms too. But business lobbying is not the only threat. 

As pay growth forecasts have been revised down following the vote to leave the EU, the way the 2020 target is calculated might mean a much lower figure than initially thought, according to a new analysis published by the Resolution Foundation. 

They predict a national living wage as low as £8.60 by 2020, 40p lower than George Osbourne’s nine pound promise. 

It is in everybody’s interest to have wages increasing as strongly as can be sustained.

Working people need money to live, and businesses need customers with money in their pockets.

Already, the Treasury has predicted domestic demand for 2017 will be down 2.1 per cent.

A lower minimum wage won’t help this. Working people can’t be expected to pay the price for Brexit. People didn’t vote for lower wages.

Keeping the economy going will be one of the biggest challenge for the new government.

Theresa May also indicated that she wants to capture the centre ground.

A strong national living wage is a decent way to do both.