The UK’s two million minimum wage workers are set to receive the smallest pay increase since 2010 – of around 15p – next April.
The COVID-19 economic shock does not mean the Government should abandon its pledge to abolish low pay according to the Resolution Foundation’s annual Low Pay Britain report.
Low Pay Britain 2020 takes stock on how low-paid workers have been affected by the Coronavirus crisis, and what this means for both the forthcoming rise in the National Living Wage (NLW), and the Government’s ambition to abolish low pay.
The UK entered the covid-crisis with the proportion of low-paid workers across Britain falling for a sixth successive year to 15.5 per cent of the workforce – its lowest level since 1978. However, low-paid workers find themselves at the heart of the crisis – facing the widest health risks and biggest economic hit. Low paid workers were 50 per cent more likely to work outside the home during lockdown. And two million workers in low-paid sectors still on furlough at the end of July, this group faces the highest unemployment risk.
This has strengthened the case for abolishing low pay, while also highlighting the need for caution in raising the NLW as unemployment starts to rise. Both can be achieved because the Government’s ambition to end low pay is flexible enough to cope with economic shocks, as it is set not in pounds and pence but relative to earnings in the wider economy. The target is to raise the National Living Wage up to the low-paid threshold of two-thirds of typical hourly earnings by 2024.
The Low Pay Commission, which recommends the rate of the National Living Wage (currently set at £8.72 an hour) had previously been expected to propose increasing the minimum wage by 50p next April. Forecasting wages to be 4.5 per cent lower next April than expected pre-crisis, the Resolution Foundation analysis indicates that the Low Pay Commission is likely to propose an increase of well under half – even a cautious rise next April of around 15p per hour would still leave the Government on track to raise the NLW to two-thirds of typical earnings by 2024.
The Foundation says that combining short-term caution with long-term ambition is the best way to help low-paid workers through the crisis, and towards a better-paid future.
It adds that the Government should also look to other ways to reward low-paid workers beyond a higher minimum wage, such as stronger enforcement of the legal wage floor, a new right to a contract that reflects the actual hours they work, and a right to compensation where shifts are cancelled without reasonable notice.
Nye Cominetti, Senior Economist at the Resolution Foundation, said:
“Britain’s low-paid workers have been at the heart of the covid crisis.
“At the height of lockdown, low-paid workers helped keep Britain afloat by looking after our loved ones and ensuring that we all had food to eat. But as Britain enters the next phase of the crisis, low-paid workers in sectors such as hospitality and leisure also face the biggest risk of redundancy.
“Given the shock to the economy, the minimum wage looks set for its smallest rise in a decade next April. While caution is justified the case for rewarding these workers is stronger than ever, and there is no reason for the Government to back away from its target of abolishing low pay entirely.”