The Queen’s Speech on 21st June declared that by 2020, the National Living Wage will be increased so that people who are on the lowest pay will benefit from the same improvements in earnings as higher paid workers. It is important to note that this isn’t set out as part of new legislation, but is a firm commitment from the Government.
The detail behind the Speech confirmed that in the UK, the national living wage will be increased to 60 per cent of median earnings by 2020.
Pre-Election, the Institute for Fiscal Studies (IFS) said at some point higher wages would hit employment, penalising workers who are supposed to benefit from higher pay. In its report, the IFS said increased wages for lower-paid workers has to be paid for by reduced profits, higher prices or lower earnings for the better-off.
The report stated “Crucially, there must also be a point beyond which higher minimum wages have substantial impacts on employment. There may be a case for gradual increases in the minimum wage but increases on the scale, and at the speed being proposed, create big risks”.
It will be interesting to watch the financial analysis reports that spin out of the Queens Speech regarding how this will cost impacts organisations, and potentially employees in the short and long-term future.