National Living Wage ‘unlikely’ to reach £9 per hour target

A £9-per-hour living wage is unlikely to exist by 2020, with next year’s increase to the new wage expected to fall 10p short of its target.

Think-tank the Resolution Foundation predicted that the wage will rise to £7.50 in 2017; 10p less than the Government’s original target. It also speculated that the wage will fail to reach its target of £9 per hour by 2020, falling short by around 80p.

Conor D’Arcy, policy analyst at the Resolution Foundation, said it was widely thought that Brexit would stunt wage growth.

“That means we’re unlikely to see the £9 national living wage that George Osborne talked about in this parliament,” he said.

Six months after the wage’s introduction, research from Begbies Traynor showed a 23% rise in the number of businesses under financial distress.

One of the businesses feeling that pressure was Offley Stores & Post Office in Offley, Hertfordshire; owner Gary Pilsworth said the effects of the living wage were beginning to hit his store.

“I’ve had to let a couple of our older staff members go and employ younger people in their place,” he said.

“I know people have to earn a certain amount, but the living wage means people of a certain age with no experience are being paid more. It’s very difficult to find that money, and it’s almost impossible for small retailers to absorb the additional cost.”

Since the national living wage’s introduction, retailers have expressed concerns that the uncapped wage would rise to unsustainable rates, dubbing it a “key concern” for the sector.

In August, James Lowman, chief executive of the ACS, wrote to business secretary Greg Clark on behalf of 21 trade associations, including the NFRN and Federation of Small Businesses.

His letter raised concerns about the living wage’s 2020 target: 60% of median earnings, which put the projected living wage at more than £9 per hour in four years’ time. In response, the Government said it would stand by the targets for the living wage.