The proportion of low-paid workers in Britain has fallen to its lowest level since 1980, and low pay could be eliminated altogether by the middle of the 2020s, according to new research.
The introduction of the National Living Wage (NLW) in April 2016 has significantly reduced low pay – from 20.7 per cent of the workforce in 2015 down to 17.1 per cent last year, the Resolution Foundation found.
Last year, almost 200,000 people moved out of low pay, defined as earning less than two thirds of the median wage. Administrative jobs, support services, and retail saw the largest fall in the numbers of workers on low pay.
A record two million workers - 7.3 per cent of the population - now receive the legal minimum wage.
Despite warnings from business groups, a significant ramping up of the minimum wage level has taken place without any significant negative impacts on jobs, the Resolution Foundation said.
UK employment is at a record high, and recent jobs growth has been fastest among groups who are disproportionately likely to be on the minimum wage, such as those with fewer qualifications.
New analysis also shows that there is no evidence that recent falls in average hours worked by lower earners are being driven by increases to the NLW.
The foundation calls for an “end to low pay” by setting the minimum wage rate at two-thirds of median hourly earnings for workers aged 25 and over.
The report claims that raising the minimum wage this high would transform the labour market, and give the UK the fifth highest minimum wage of all advanced economies.
The government should therefore move cautiously towards meeting this target and be prepared to adjust the NLW in light of changing economic conditions, and the Low Pay Commission should continue to play a key role in looking for any emerging evidence of negative impacts.
Nye Cominetti, Economic Analyst at the Resolution Foundation, said: “The National Living Wage has transformed Britain’s low pay landscape, with the number of low-paid workers falling by 200,000 in the last year alone. Women and young people have been the main beneficiaries of a higher minimum wage, whose ratcheting up has not stopped employment rising to a record high.
“It’s great that both main parties want to go even further on raising the minimum wage and eliminate low pay altogether. But such an ambitious move would transform the labour market, and must therefore be approached boldly but cautiously.
“An ambitious but cautious approach that saw the National Living Wage continue to rise after 2020 – at a faster pace than the minimum wage has increased over its 20 year history ¬– would put Britain on course to eliminate low pay in the middle of the 2020s, while still giving the government room for manoeuvre if economic conditions change.”
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