The National Living Wage: Landmark or Lie?

You can’t fail to have heard about the introduction of the National Living Wage set to take the country by storm on 1st April 2016. So what is the National Living Wage all about?

For many years a campaigning organisation called Living Wage Foundation have been promoting a voluntary minimum hourly rate of pay which they call the Living Wage. They state that they have calculated this on the basis of the basic cost of living and, with the Living Wage being a good deal above the statutory minimum wage (currently £8.25 outside of London), much pressure has been applied to the government to make some changes.

Sadly, the National Living Wage is a completely different beast. The government state that they want to move away from a ‘low wage, high tax, high welfare society’ toward ‘a higher wage, lower tax, and lower welfare society’. The change this April will see the National Minimum Wage for those aged 25 and over, currently standing at £6.70, replaced with the National Living Wage starting at £7.20. There will be no change for those under 25.

This increase is intended to be the first of many with the target being the minimum wage premium reaching 60% of average earnings by 2020. The Office for Budget Responsibility forecast that full time workers currently receiving the National Minimum Wage will earn over £4,800 more by 2020 as a result of the introduction of the National Living Wage.

Whilst this is without question the biggest single increase in a statutory earnings level for some years, is it the landmark change that is being advertised daily, or is it simply a placatory increase in the National Minimum Wage that has been cleverly disguised? It is hard to believe that the National Living Wage was not strategically named to secure the instant support of those who have long rallied around the Living Wage Foundation and cause confusion between the two. Whilst true supporters will instantly recognise the differences, it is already misleading people who are familiar with the Foundation’s work, but not its detailed ambitions. Unfortunately if this is the case, with the Living Wage sitting more than £1 above the National Living Wage and the latter only applying to those aged 25 years or above, misplaced support will be short lived.

The real impact of the National Living Wage, and the government’s commitment to it, will unfold with the passing of time. It can only be hoped that when re-visiting this blog in four years, that the government will have stayed true to their stated intentions and our country truly is a higher wage, lower welfare society for all. Only time will tell.

Victoria McMeel
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