Labour To Increase The National Living Wage! But How?

Yesterday the Shadow Chancellor (John McDonnell) said that his party would create a real Living Wage of at least £10.00 an hour.

At the labour party conference in Liverpool, he said that “everyone would earn enough to live on” and that if they win the next election that they would “write into law a real living wage”.

He outlined the shadow government’s commitment to create a new National Living Wage (NLW) review body that would be set up and charged to ensure that the living wage was set up at a level for a “decent life”.

Independent forecast suggest that this figure will actually be over £10.00 an hour, something that John McDonnell accepts might be needed.

Ian Abel, Head of Employment, said “A living wage that is set to banish poverty wages is laudable and a commendable aim, but John McDonnell stayed suspiciously silent on just how smaller businesses would be able to afford this increase, bearing in mind that the current level of NLW is £7.20 an hour for workers aged 25 and over and this increase would therefore equate to potentially over £2.80 per hour more, per worker aged 25 and over.”

The current government wants to raise the living wage to £9.00 an hour by 2020m but labour want to go even further.

Labour would also champion a ‘Universal Income’, this is the floor that no-one should fall below.

Ian continued “We recognise that the £10.00 figure is arbitrary and not necessarily a realistic one, and as a small business ourselves we like the idea of helping employees but we must remember that businesses need to prosper too and don’t feel the pinch.”

“There are a number of areas that a government can look at to help businesses pay for these additional wages – they could expand Employment Allowances, reduce National Insurance Contributions for businesses or give some form of Tax relief, such as a reduction in corporation tax.”

Michael Lewin Solicitors gives this announcement a cautious welcome, and we urge them think carefully about how this affects the economy as a whole. Discussion on a Living Wage (and Minimum wage) provides a great deal of fodder to politicians and economists who debate the pros and cons of this controversial area, but for us it isn’t a political discussion, but a social one; it’s not worth paying a low paid individual more if the businesses they work for risk downsizing to pay for it, or worse still, go out of business.

We need to remember that the last change earlier this year, raising the NLW to £7.20 an hour, saw one in four employers with higher labour costs reduce staff hours, furthermore recruitment is down across these businesses as are profits. Therefore any political party must consider their bold claims and the realistic way to try and achieve these aims – not just grab votes for election purposes.

We agree in building an economy that works for everyone, but we also need to let small firms grow too.

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