05.01.16
Living wage will be first ‘economic test’ for council devolution
Implementing the new wage floor from April will be one of the first tests of economic leadership under devolved local governments, especially in city-regions with lower average pay, a think tank has said.
Analysing the number of workers set to be affected by the national living wage (NLW) by 2020 in major city-regions, the Resolution Foundation found that the new measure will be “felt very differently” across the UK.
Nationally, about 26% of employees will feel some benefit from the living wage, either as their pay is pushed above the new threshold or as people with pay just above it get a bump to maintain salary differentials. City-regions where more workers will see a rise include Sheffield, Nottingham and Birmingham, while in Oxford, London and Cambridge, only 13-15% of employees will be affected. There is no specific London weighting for the NLW, although the Living Wage Foundation calculates that it should be £9.40 in the capital, based on living costs.
Across the public sector, more than one-fifth of employers have aready said they plan to cut the size of their workforce as a result of the NLW’s introduction from April. It will then gradually rise until 2020.
The Resolution Foundation says the NLW will be the devolved regions’ first real test – ensuring they can minimise job losses and that large groups of workers do not get stuck earning only the legal minimum.
Writing for PSE, Cllr Andy Hull, executive member for finance and performance at the London Borough of Islington, also explained why it is vital that councils lead the way on the NLW and stick by its principles – even at a time of budget cuts.
Adam Corlett, economic analyst at the Resolution Foundation, said: “The new NLW will have a huge impact on low pay, particularly towards the end of the Parliament as it approaches £9 an hour.
“But implementing the new wage floor will be challenging, particularly in cities like Sheffield where wages tend to be lower. National, local and new regional politicians must work closely with employers to ensure that the NLW is a success, particularly in low paying sectors.”
To ensure the NLW is affordable for local employers, the organisation said there must be a greater focus on boosting productivity and progression in lower paying sectors, such as retail, hospitality, cleaning and care.
The think tank is currently carrying out an employer-focused investigation with the Chartered Institute of Personnel and Development to assess how firms adapt to the new wage floor.
But it also continues to campaign for the voluntary living wage regardless, arguing that even the new NLW is not properly a ‘living wage’.
“It will take more than a higher wage floor to tackle Britain’s low pay problem. Expanding the reach of the voluntary living wage campaign will still deliver higher pay for thousands of workers,” Corlett said.
“It’s also vital that employers create progression routes at work so that staff can be lifted out of low pay altogether.”