what impact the living wage will have?

[Sunny67]

I could well be missing something here so I'm happy to have it explained to me
Living wage increase is great but what will happen to those on or around that figure already?
Let's say a person at a supermarket checkout gets moved to £9 per hour but a supervisor is on £9.50 an hour, more responsibility etc, then surely the supervisor will want an increase too. So if before the LW the difference between the two was £1.50 an hour then the supervisor would expect to have a rise of that amount. Same to be said for a huge amount of of businesses
If so then the cost of living will shoot up

[HomeHelpMeGawd]

This is known as the ripple effect. It's seen as a net positive for the economy, as it increases pay mainly at the lower end of the income scale and that drives more spending. Wage rises don't automatically lead to price rises. Businesses facing price pressures will seek other ways to cut costs rather than pass the costs on. This could be the withdrawal of perks, shorter hours, etc, plus additional savings on non pay items. All told, the expectation is that relatively few jobs will be lost through a higher wage floor.

[youareallbonkers]

The cost of living will increase, employers won't be able to afford to employ as many people so won't replace people when they leave. Minimum wage jobs should be for students, 1st jobbers and retired people to earn extra cash. Everyone else should see them as a starting point not a career.

[Rebecca2014]

Not much because tax credits have been cut so dramatically. So the Tories have stuck two fingers up at everyone and tried soften the blow by saying "Look we are giving you a living wage!" but sly for not saying they cut tax credits so you are no better off, actually worse off regardless.

[Charlesroi]

They'll probably put the supervisor's money up by 50p an hour and reduce hours if s/he moans about it.

I must say I'm impressed with the government's spin doctors as they appear to have successfully re-branded the NMW as a living wage. Previous figures suggested that the living wage was about £7.80 p/h outside London but it's now -apparently - £7.20. Cynical, calculating but impressive.

[BreakingDad77]

Well the tories have had to do it, as they have to get their cutting taxes system to work, as currently all it means is execs patting themselves on the back with bonus's and no trickle down.

[Goshthatsspicy]

you are you saying people not listed in your post shouldn't be on min wage?
If so, many people don't have the choice.

[HomeHelpMeGawd]

Rebecca, you may not like the policy, but Osborne explicitly drew a link between tax credits and the national living wage. He said (I paraphrase): the government should not be subsidising employers with tax credits; employers should pay a proper wage instead. That is an argument that many on the left have been making in the past few years.

[Sunny67]

Thanks for the replies
I can see some difficulties ahead though with those who are skilled only earning a fraction above unskilled labour
There is bound to be many things that will be affected such as care for the elderly. I assume care costs will rise considerably as many careers are on very low wages, I'm not sure that there is the money within the private care homes or councils to cover this easily or if staffing levels will be cut to compensate.
Similarly with child care costs

[happybubblebrain]

I don't think it will have too much of an impact at first. A few businesses will fold and there will be a few more unemployed. Young people (over 25) who don't have children will have a bit more money.

Long-term the poor will still be getting poorer because benefits will be cut more and more as everyone will now be supposedly be earning a "living wage".

Long-term the poor will get poorer, the rich will get richer. Which is exactly the same as before the budget.

[GetTheCarPenfold]

I would have thought that this is why the corporation tax rate is being reduced down to 19% and then 18%. To enable many businesses to free up additional funds to cope with the ripple effect that the LW rate will have on wages across the board.

Smaller employers can also claim an additional £1,000 employers' allowance to offset against their payroll NI costs.

IMHO however £9/HR in 2020 will be inadequate to be called a LW by then, unless it will be indexed up between now and then. The dramatic reduction in tax credits will not be compensated for by the increase in hourly rates of pay.

[meglet]

I think they will stop tax credits / universal credit completely when the living wage kicks in. But I have a very negative view of this government, my money is on that they're up to something else.

[Oobis]

I thought the idea was that the take home pay of workers didn't really change, just that their pay was more and tax credits less (funded by reducing corporation tax for employer) hence reducing Welfare State supporting workers.

[tabulahrasa]

Oobis - except there'll still be a deficit in income for most people.

[TinyManticore]

Changing the name of the minimum wage won't make a damn bit of difference.

[DrDre]

None - prices will just rise in order to pay for the higher wages, so peoples' spending power will remain the same.

[bettysviolin]

Well, as DS1 said to me today - may as well set the living wage at £100 an hour because no one's obliged to pay it so they won't. Supermarkets choose the living wage over minimum wage? Has that actually happened in any big chains?

[bookbag40]

I think they have been quite crafty with the "living wage" as people only hear the headline of £9 per hour - great!

However firstly it's not going to be £9 per hour for another 5 years. During those five years prices (especially house prices) will continue rising so the cost of a "basket of goods" will go up and £9 in 5 years will not purchase for you what it would get you in todays prices.

Like you say if there are currently skilled workers on £9 per hour they will expect their wages to go up too and businesses will need to do this or they risk loosing employees or having a demotivated workforce.

Therefore because all salaries have gone up there will be more demand for goods which means that suppliers can then up their prices up meaning that people on the minimum wage will be in exactly the same position relatively even though the number of £ they are earning per hour has increased.

I was also thinking today that although the minimum wage will go up to £9 in 2020 the government might well choose at that point to freeze it for a few years too.

So actually it is quite good spin by the government but probably not a massive change in real terms!

[gamerchick]

Heh I can see the next thing to pour scorn on. Minimum wage jobs should be for a certain group of people only and taking them up is selfish and makes you a scumbag

[bookbag40]

bettysviolin as I understood it the minimum wage has now been replaced by the so called living wage so there is no minimum wage any more?

[SchoolTripNot]

So what is the time scale on the wage increases? I.e. Next year it goes up by 50p then another £1 in 2017 ?

[PercyGherkin]

Betty the current living wage is optional, this will be basically a compulsory top up to NMW for workers 25+. It isn't same as current living wage which is calculated based on what it costs to, you know, live - it's based on 60 per cent of median wage or something, ie what they think market will bear. In some parts of country you won't be able to live on the NLW.

[PercyGherkin]

NMW will still exist for under 25s.

[bookbag40]

It seems a bit silly calling it the living wage if it isn't actually a living wage - they may have shot themselves in the foot a bit there.

I also wonder if it is going to make it hard to get a job for over 25s as if you were an employer choosing between a 28 year old and a 23 year old you might just choose the younger one to save money.

[bettysviolin]

Thank you Percy and bookbag - who needs the Red Queen in Alice in Wonderland when we have the Tories in power? So the living wage is no longer calculated to mean enough to live on, and the 'poor' has now been redefined by IDS as undeserving, crackhead scum. So the poor won't dare admit to being poor in case people think they are 'poor.' I watch what the entitled do to the normal in our country and can't understand why there isn't a French revolution style reaction. But no, instead, we vote them back in and boot out the coalition party that restrained them! Baffling.

[YeOldTrout]

Renaming the NMW as a Living Wage is Spin, I predict they will get away with it.
It is a sharp rise in min. wage & suggests ideologically that Tories have embraced the principle of Living Wage.
Under 25s will be more attractive to employ.
Cleaners, Dinner ladies (& similar) will get big rises & there will be little money left over to give anyone else a rise in public sector. So bad news if you work for public sector employer but not at lowest pay grades.
Inflationary effect (net benefit for almost all as it reduces national debt)
Some very small businesses will struggle to be profitable.

People who tend to be unemployable because of their low productivity will become even more so. So the cohort who are stuck on JSA will become more stuck there.