The floor’s the limit: Examining the main parties’ plans for a higher minimum wage

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From its controversial introduction in 1999 amid warnings of job losses, the National Minimum Wage has flourished, and since 2016 has been turbo-charged by the National Living Wage. Both main parties now want to go even further. The Conservatives want to raise the UK’s legal wage floor to a level that ends low pay, while Labour want to turn it into a real Living Wage for all workers aged 16+, so that it reflects the cost of living. Either way, the UK is set for one of the highest wage floors in the world. How different are the main parties’ plans for the minimum wage? Do they risk setting the wage floor at too high a level that causes job losses? And how can they match welcome ambition with an evidence-based approach that has served the UK so well over the past 20 years? At an event at its Westminster offices, the Resolution Foundation presented new analysis of the two main parties’ plans for the minimum wage, including how they compare with each other, with other countries, and how they might affect firms and workers across the UK. A panel of experts debated key questions about the future of the minimum wage, followed by an audience Q&A.

Government & Nonprofit

#GE2019
Wifi
2QAG_Guest
Welcome_Guests November 19@resfoundation
The floor’s the limit
The minimum wage in the 2019 election
Katherine Chapman, Director of the Living Wage Foundation
Helen Dickinson, Chief Executive of the British Retail Consortium
Alan Manning, Professor of Economics at LSE
Nye Cominetti, Economic analyst, Resolution Foundation
Chair: Gavin Kelly, Chair, Resolution Foundation

3
Minimum and living wages, 1999-2019
Source: Low Pay Commission
@resfoundation
The minimum wage main adult rate is now £8.21

4
Minimum and living wages, 1999-2019
Source: Low Pay Commission
@resfoundation
… this sits alongside specific rates for younger workers

5
Minimum and living wages, 1999-2019
Note: 18-20 rate was 18-21 until 2011.
Source: Living Wage Foundation and Low Pay Commission. @resfoundation
… and the two (voluntary) living wage rates

6
Annual growth in minimum wage (main adult rate) and median hourly pay
Source: Low Pay Commission, and RF analysis of Annual Survey of Hours and Earnings (ONS)
@resfoundation
The wage floor has grown fast, then slow, then fast again
2016: National
Living Wage
introduced

8
Value of minimum wage in 2024 under current path and Conservative and Labour plans
Conservatives’
plan implies a
minimum wage 9
per cent higher in
2024 than under
current policy
Source: RF analysis using Annual Survey of Hours and Earnings, and Office for Budget Responsibility projections of average pay.
@resfoundation
Both main parties have ambitious plans

9
Cash value of main adult minimum wage: current path, and Labour and Conservative plans
Source: RF analysis using Annual Survey of Hours and Earnings, and Office for Budget Responsibility projections of average pay.
@resfoundation
Key difference 1: Labour want to move more quickly

10
Bite of minimum wage relative to median full-time hourly pay in select OECD countries
Source: OECD and RF calculations based on Annual Survey of Hours and Earnings (ONS) and OBR.
@resfoundation
Either approach pushes us to the top of the international
league table

11
Distribution of pay by age band, and minimum wage policies, expressed in April 2020 terms
Source: RF analysis of Annual Survey of Hours and Earnings (ONS); OBR average wage projections; Low Pay Commission.
@resfoundation
Key difference 2: The parties have very different policies when
it comes to youth rates

12
Distribution of pay by age band, and minimum wage policies, expressed in April 2020 terms
Source: RF analysis of Annual Survey of Hours and Earnings (ONS); OBR average wage projections; Low Pay Commission.
@resfoundation
Key difference 2: The parties have very different policies when
it comes to youth rates

13
Distribution of pay by age band, and minimum wage policies, expressed in April 2020 terms
Source: RF analysis of Annual Survey of Hours and Earnings (ONS); OBR average wage projections; Low Pay Commission.
@resfoundation
Key difference 2: The parties have very different policies when
it comes to youth rates

14
Distribution of pay by age band, and minimum wage policies, expressed in April 2020 terms
Source: RF analysis of Annual Survey of Hours and Earnings (ONS); OBR average wage projections; Low Pay Commission.
@resfoundation
Key difference 2: The parties have very different policies when
it comes to youth rates

15
Distribution of pay by age band, and minimum wage policies, expressed in April 2020 terms
Source: RF analysis of Annual Survey of Hours and Earnings (ONS); OBR average wage projections; Low Pay Commission.
@resfoundation
Key difference 2: The parties have very different policies when
it comes to youth rates

16
Percentage of employees at 10p pay bands in 2015 and 2018
(2015 distribution uprated in line with median pay growth 2015-18)
We estimate that
£3bn was added
to low earners’
total annual pay
between 2015
and 2018
Source: RF analysis of Annual Survey of Hours and Earnings (ONS).
@resfoundation
Bringing politics into rate-setting brings risks, but also need
to recognise benefits to the low-paid over recent years

• Both main parties have ambitious plans for the future
of the minimum wage
• Key differences are pace of increases and on youth
rates (and, possibly, setting & uprating process)
• Political meddling brings risks - employment effects,
credibility, and harder to change course if needed
• But benefits too – now looks like minimum wage was
too low pre-2016
• Task for next Government: hold onto ambition but find
uprating process that manages risk & allows flexibility
18
Conclusions
@resfoundation

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Precarious profits? Why firms use insecure contracts, and what would change t...

ResolutionFoundation

Powering Britain: Can we decarbonise electricity without disadvantaging poore...

ResolutionFoundation

In credit? Assessing where Universal Credit’s long rollout has left the benef...

ResolutionFoundation

Building pressure? Rising rents, and what to expect in the future

ResolutionFoundation

The combination of high house prices and stagnating incomes over recent decades, coupled with the decline of social housing, mean that millions more of us are private renters. And they are renting for longer too. Private rents have risen swiftly in the wake of the pandemic. What happens next matters hugely for millions of families, and yet the drivers of private rental costs are poorly understood with a range of explanations being proposed for the post-pandemic surge. To what extent has landlords selling up driven the recent rise in rental prices? Or are other factors – such as earnings growth or higher interest rates – more significant? What should we expect the future to hold for rents? And what does this mean for renters, landlords, and policymakers? The Resolution Foundation is hosting an in-person and interactive webinar to debate and answer these questions. Following a presentation of the key highlights from new research on what is driving recent trends in private sector rent levels, we will hear from leading experts on the short and longer-term outlook.

Setting a high bar: Celebrating 25 years of the minimum wage, and plotting it...

ResolutionFoundation

Living life to the full: How can we make our longer lives healthier, happier ...

ResolutionFoundation

The document discusses longevity and population trends over time. It notes that while Malthus predicted overpopulation would be a problem, human ingenuity solved this through innovation, investment, and institutions. Now, life expectancy has increased dramatically meaning most people will live to an old age. However, simply living longer is not enough - people need to age in a healthy, productive way. A second longevity revolution is needed focused on how to age well. This revolution aims to create longer, healthier lives where people remain engaged and productive for longer.

The wealth of a nation: What the changing size and shape of household wealth ...

ResolutionFoundation

The document proposes several reforms to the UK tax and financial system to make wealth and housing more affordable and equitable across generations. It recommends reforming capital gains tax and inheritance tax to tax wealth accumulation, fixing issues with the council tax system, using macroprudential tools to stabilize the housing market, expanding mortgage insurance and long-term fixed rate mortgages to protect households, reviewing auto-enrollment pension contribution rates, and creating intergenerational risk-sharing mechanisms for state pensions and collective defined contribution plans.

Boosting prosperity across Britain: How cities like Bristol can help to end e...

ResolutionFoundation

Game changer? Assessing the Budget’s economic, and electoral, impact

ResolutionFoundation

The upcoming Spring Budget may be the last big fiscal event before the General Election, one of few chances for the government to set the terms of the economic debate. And with the government trailing heavily in the polls, and the economy entering a mild recession at the end of last year, the pressure is on to make it a game-changing Budget economically and electorally. But the Chancellor will also have to confront real trade-offs if he’s deliver a Budget that works for both the next six months, and the five years after that. How big are the Chancellor’s tax cuts? Do they change the big picture of the government’s wider tax raising plans? What is the outlook for public services after the election? Where does the government plan to take the social security system, as it copes with rising numbers of us being sick or disabled? And will any of this make any difference to who forms the next government, and what they’re able to do? The Resolution Foundation is hosting an in-person and interactive webinar to debate and answer these questions. Following a presentation of the key highlights from the Resolution Foundation’s overnight analysis of Spring Budget 2024, we’ll hear from leading experts on what the Budget means for the election, and the economy.

Ending stagnation: The role of cities like Nottingham in boosting economic pr...

ResolutionFoundation

The document discusses a project called Economy2030Nottingham that aims to transform the local economy of Nottingham, United Kingdom over the next decade. It will focus on developing new industries and business models, expanding skills training programs, and stimulating entrepreneurship and innovation among local businesses and universities. The goal is to create a more inclusive, sustainable and prosperous economy for Nottingham by the year 2030.

Healthy starts: How mental ill-health shapes the education and economic prosp...

ResolutionFoundation

Tax cuts today, spending cuts tomorrow? How the Budget might shape the Genera...

ResolutionFoundation

Trading standards: How exposure to global trade shapes our living standards

ResolutionFoundation

Saving for today. And tomorrow. How to boost households' financial resilience...

ResolutionFoundation

Wifi networks can be expensive to implement and maintain, while also being inefficient and ineffective at times. Pension participation among workers has increased significantly in recent years, rising from 47% in 2012 to 79% in 2021. When workers' take-home pay is reduced, about a third of that reduction leads to lower consumption, while the remainder results from less liquid savings or increased debt levels.

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