National Living Wage sees threats and benefits for workless

Tue, 08/09/2015 - 14:02 -- nick

George Osborne's introduction of the National Living Wage (NLW) of £7.20 per hour in July received entirely reasonable criticism.

One of our objections was the use of living wage language to describe something that wasn't, but was rather a simple raising of the minimum wage and included no calculation of the cost of living that backs up the real thing.

Any increase is welcome, but, as with so much of what this government does, at its heart is a cheap political con trick which focuses on taking Labour's clothes where they have proved popular rather than being concerned over the poverty too often experienced by low paid workers.

Today's news from Manpower is likely to concern Osborne more though.

The recruitment giant has surveyed 2,100 employers and found that some were planning to take on fewer workers as a result of this increased cost particularly in the unemployment hotspots in the north-east, north-west and Yorkshire and Humberside.

Within this downbeat assessment is the potential for some good news, higher costs for older workers providing the potential for increased employment for those aged under-25 who are not eligible for NLW.

James Hick, a spokesman for Manpower, said: “The national living wage is sending shockwaves through the UK labour market. An unintended consequence of its introduction is that firms might try to bypass the legislation altogether. We anticipate that some employers may look to mitigate the extra costs by taking on more young or self-employed workers, who are not entitled to the national living wage."

Young people currently see unemployment rates that are three times the national average, and anything which prompts employers to take on inexperienced people should be good news.

The question of whether these low-paying jobs are the kind we want to be creating for those just entering the labour market is another question, and opportunities for progression and training must be built in as compensation for the lower income.

The potential for increased self-employment is a big downside, with individuals who are ill-equipped to fund sickness or periods out of work required to do so instead of companies that are much better placed. Providing self-employment as a way of avoiding wages of £7.20 per hour forces another level of financial challenge on those affected and these low-paid and unguaranteed jobs will not help individuals avoid poverty or help the UK build its productivity and economy.

It will be worth keeping an eye on employment numbers over the next months, and particularly in low paying sectors, to see whether the April 2016 introduction of the new pay rate actually makes a difference.