Pay growth set to weaken and more workers to earn legal minimums, report warns

12 October 2016

Wage growth is set to falter following the vote to leave the EU, think tank the Resolution Foundation has warned.

The organisation has lowered its forecast for the National Living Wage (NLW) by 10p to £7.50 an hour for April 2017, and set its prediction for the 2020 NLW at £8.60, significantly lower than the the Office for Budget Responsibility pre-Brexit projection of £9.

Resolution Foundation also reported that the proportion of workers earning the legal minimum – whether that is the NLW or National Minimum Wage – will triple by 2020, when it is expected to be paid to one in seven workers under the age of 25, rising to one in five in cities, and almost half of all workers in the hospitality sector.

Conor D’Arcy, Policy Analyst at the Resolution Foundation, commented: “With over four million workers set to be earning the new legal minimum by 2020, ministers need to work closely with employers to ensure that they’re not just able to pay the legal minimum, but can offer staff a route out of low pay altogether.”

The Institute of Employment Rights argues that relying on statutory minimums encourages a race to the bottom on pay and, in this year’s Manifesto for Labour Law, advocates instead for a shift in labour law to collectively agreed wages and conditions.

This means wage floors can be negotiated at different rates depending on the sector through agreements made between trade unions and employer associations. These minimums can then be further built upon at enterprise level.

The Manifesto has been adopted by the Labour Party, which is looking into its implementation, and is backed by major UK unions including the TUC, UNITE, UNISON, GMB, UCU, BFAWU, NUT, NUJ, FBU, CWU and TSSA.