Living wage ‘did not lead to higher incomes’

THE National Living Wage has reduced pay inequality but productivity improvements have proved to be “elusive”, according to a new report.

The Low Pay Commission, which advises the Government on the minimum wage, said fears about job losses did not materialise.

In a review of the living wage (NLW) between 2015 and 2020, the commission said the impact on workers’ incomes was tempered by other factors.

The announcement of the NLW heralded a new era for minimum wages, with a number of achievements at the end of that period when it reached the Government’s initial target of 60% of median earnings, said the report.

While the NLW increased wages and did not reduce employment, the increase in earnings did not lead to higher incomes and did not measurably improve productivity, according to the commission.

Its report said: “Nevertheless, the growth in earnings helped reduce regional pay inequality and contributed to shrinking gender and ethnicity pay gaps.

“After the introduction of the NLW, minimum wage workers were less likely to move employers but continued to progress into higher-paid roles at the same rate as previously.”

The Government’s current target is for the NLW to reach two thirds of median earnings by 2024. Bryan Sanderson, who chairs the commission, said: “As we continue to push the minimum wage towards its new target, it is important we learn the lessons of recent history. This review is a timely reminder of the policy’s achievements, as well as its limitations.”

The NLW is now £9.50. The voluntary Real Living Wage is £11.05 an hour in London and £9.90 outside the capital.