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National Minimum Wage Under the Conservatives: What’s the Impact on Private Sector Businesses?

It’s safe to say that not many people could have predicted, or did predict, the outcome of the general election. But as the dust settles on what was possibly one of the most surprising election days in decades, we want to get down to the nitty gritty of what the results really mean for industry in the UK – starting with the impact of national minimum wage law and the real cost to businesses.

What Do the Conservatives Say?

Last year, the Conservatives introduced the National Living Wage. Not to be confused with the ‘real living wage’, the NLW sets rates at £7.50/hour for over 25s, with 21-24 year olds entitled to £7.05/hour, 18-20 year olds £5.60/hour, 16-17 year olds £4.05/hour, and apprentices £3.50/hour. This is in contrast with the independently calculated ‘real living wage’, which states that workers need £8.45/hour to live – or £9.75 if they live in London.

In their 2017 manifesto however, Theresa May’s party pledged to increase the National Living Wage until it’s at 60% of median earnings – expected to take until 2020. At this point, the Institute for Fiscal Studies calculates that over 25s will be on £8.75/hour – 5% more than if rates had been increased in line with average earnings, and just over the ‘real living wage’ (although this doesn’t take into account the fact that the RLW is calculated annually and will likely have increased by then).

What Will be the Cost to Businesses?

According to the IFS, the Conservative NLW policy would affect 2.5 million workers and cost employers around £1bn per year – a 4% increase in employment costs.

Uncertain Times

Bearing in mind the Conservative’s unexpected decline in support, their decreased mandate, and a likely partnership with the Democratic Unionist Party on the cards, it might be worth looking at what the DUP has to say on the National Minimum Wage.

Fortunately, for the sake of clarity, the DUP manifesto merely states that it supports the National Living Wage legislation and will continue to support annual increases. It seems then that Theresa May (or her predecessor) won’t face much opposition there. Whether she’ll be able to continue with her manifesto in the face of the rest of the opposition though is another matter.

Of course, that’s not the only uncertainty that lies ahead for British politics. The complexities of Brexit aside, talk of a further general election has yet to abate. While we’re not sure the Conservatives will be in favour of calling another election, there’s the very real possibility that a second vote could result in a Labour government.

So here’s the Labour manifesto stats on NMW, just in case!

  • NMW raised to £10/hour by 2020 for all over 18s
  • A 20% increase in earnings
  • 7.1 million workers affected
  • A 15% increase in employment costs
  • An estimated cost of £14bn to employers

All that remains now is to wait and see who finds themselves in government!

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Carry on reading