I am just catching up on my weekend reading.
Here’s the FT - pretty depressing stuff for the low paid.
When chancellor Rachel Reeves announced the NICs increase in her October Budget, the Office for Budget Responsibility said most of the cost would be borne by workers through slower pay growth and higher prices, while the equivalent of 50,000 jobs would be lost through fewer roles or shorter hours.
But the fiscal watchdog did not look at the combined effect of the tax and minimum wage rises. It admitted last week that the tax rise could hit jobs more than it initially expected, because it increased costs most sharply in low-wage sectors where employers must keep raising pay, both to match the legal minimum and to motivate staff higher up the ladder.
Analysis by the Resolution Foundation shows how uneven the impact will be. While next week’s combined changes will add 3.4 per cent to average labour costs, the increase will be 6.6 per cent for the bottom 10 per cent of earners, according to calculations by the think-tank. It will be just 1.7 per cent for the top 10 per cent.
There will be an especially stark change for part-time workers, the think-tank said. Whereas labour costs will rise by 10.2 per cent for a full-time adult earning the minimum wage, they will rise by 14.2 per cent for a part-time worker earning £10,000 a year on the same hourly rate. This worker would previously have fallen below the NICs threshold.
Nye Cominetti, principal economist at the Resolution Foundation, estimated this would lead to a drop in employment equivalent to the loss of 85,000 employees, concentrated among the lowest paid. He forecast a drop in employment of 0.7 per cent in the bottom decile of the pay distribution.
“This is a significant number . . . which would have been smaller if policy had been better co-ordinated,” Cominetti told the Financial Times.