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IEA - National Living wage will harm both employers & low-skilled employees

NLW estimated to result in the equivalent of 60,000 fewer employed by 2020

Ahead of the implementation of the National Living Wage tomorrow, Ryan Bourne, Head of Public Policy at the Institute of Economic Affairs, said: 

“In recent days, many have lamented the potential loss of tens of thousands of jobs in the steel industry. The National Living Wage is estimated to result in the equivalent of 60,000 fewer employed by 2020, and yet has been widely celebrated. Its introduction will make it too expensive for some businesses to take on young, low-skilled workers in jobs which provide essential experience. It is these vulnerable people who will be hit the hardest.

“The implementation of the NLW shifts both the purpose and means of wage setting. This is no longer about eliminating perceived exploitative pay, but about maintaining a more equal distribution in the bottom half of the labour market. By undermining the Low Pay Commission – now in effect just a monitoring, rather than a wage-setting body – this Conservative government has opened the door for future Chancellors to increase the NLW much more significantly, unlinked to firms’ ability to pay and the general health of the economy.

“20% of the private sector workforce will now have their wage determined by government. Politicians have created significant barriers to employment and costs to business. And even though the 60% of median earnings mechanism should mean the value of the NLW should fall after a recession, it’s hard to see that politicians would really reduce it. The pernicious effects of the NLW may be far more damaging over time.”

Notes to editors: 

To arrange an interview, please contact Stephanie Lis, Director of Communications: slis@iea.org.uk or 07766 221268

Further Reading:

The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems.

The IEA is a registered educational charity and independent of all political parties.

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