Families ‘worse off’ despite living wage
MANY families will still find themselves worse off after the introduction of the new national living wage, it has been claimed.
Experts at the Resolution Foundation think-tank investigated the impact of Chancellor George Osborne’s plan to increase the minimum wage to £9 per hour for people aged over 25 by 2020.
It found the proportion of workers classed as ‘low paid’ will fall to its lowest level in 35 years as a result of the policy.
But a large number of households will still end up poorer because of cuts to tax credits.
Matthew Whittaker, chief economist, said: “Britain’s low pay landscape is set to be transformed over the next five years by the new higher wage floor.
“The significant fall in low pay will be very welcome after two decades of standing still.
“But a change of this magnitude won’t be without big challenges.
He added: “And while it is welcome to see progress being made on low pay, the wider picture on living standards is more troubling.
“Many working households will find themselves worse off, even as the national living wage improves their pay, as a result of the tax credits cuts announced alongside it.
“It’s important the Government doesn’t miss the bigger picture on living standards.”
The Chancellor has insisted his living wage plans will drive up an increase in living standards.
But the think-tank report said that while the policy will make inroads into the number of people classed as in ‘low pay’ – meaning they are on less than two-thirds of median hourly earnings – low-income households will not benefit.
And while the living wage will limit the income losses stemming from welfare cuts announced in the Chancellor’s Budget in July, it will not make a considerable difference.
The losses faced by the poorest households in the country will be reduced by just 13%.
The think-tank also warned that the Budget weakened work incentives and reduced incomes for many low-income households.
It found that 27% of women were low paid, compared with 17% of male employees.
Meanwhile workers aged 30 and under are more than twice as likely to be low paid – on 38% – as those aged 31 to 60, 15% of whom are below the threshold.