The number of employees earning the minimum wage will double to more than 10% of the UK workforce by the end of this parliament, according to new research.
A study published on Thursday by the Resolution Foundation, timed to coincide withthe 20p an hour increase in the minimum wage, found that the decision by George Osborne to lift the statutory pay floor through a national living wage would result in a sharp increase in the numbers of people having their wages set by the state.
The Resolution Foundation said only one in 50 employees were being paid the minimum wage after it was set at a cautiously low level by Tony Blair’s government in 1999.
In the years since, the number of workers earning the minimum wage has risen to one in 20, but is now set to increase to one in nine by 2020, or 3.2 million people.
Adam Corlett, the Resolution Foundation’s economic analyst, said: “Over a million workers will get a welcome pay rise today as a result of the latest increase in the minimum wage.
“Today’s 20p rise is relatively conservative given the strength of the labour market, but most of those on the minimum – and many just above it – will get a far bigger increase in April as a result of the national living wage announced in the budget.
“The new ambition shown by the chancellor is welcome. But it will mean that around one in seven private sector workers will have their pay directly set by government by 2020. Given the scale of the change, government must now work closely with the Low Pay Commission and employers to ensure the policy is a success. It’s also important that businesses offer low-paid staff more opportunities for promotion and progression so that they don’t get stuck on the wage floor.”
The Resolution Foundation report found that in some regions – the north-east, East Midlands and Wales – one in seven workers would be on the minimum wage by 2020. In the hospitality sector, 40% of employees will be earning the wage, while women and older workers are also particularly likely to be affected.
Figures released by the Office for National Statistics on Wednesday confirmed that the economy grew by 0.7% in the second quarter of 2015, with household living standards rising at the fastest rate in five years.
Surveys published on Thursday by two business groups provide differing views on the economy’s prospects. The British Chambers of Commerce (BCC) said both manufacturing and service companies had suffered from dampened growth in recent months and the outlook was for moderate growth over the next year. John Longworth, the BCC’s director general, said the results of its economic survey for the third quarter of 2015 were “somewhat disappointing”.
The CBI was more upbeat. Despite a slight slowdown detected by its monthly growth indicator, the employers’ organisation said firms were upbeat and expected strong expansion over the coming months.
