Brexit could cut value of National Living Wage by 40p an hour

Scheme has had little effect on jobs but EU vote creates uncertainty


The National Living Wage (NLW) has not caused significant job losses since it was introduced in April, according to a survey commissioned by the Resolution Foundation.

While many feared that George Osborne’s scheme would create job losses, it appears that most employers have responded by raising prices or reducing profits, with just 14 per cent of companies reducing their workforces.

However, the research was carried out before the EU referendum and the authors warn that ‘Brexit is likely to reshape the landscape in which many low-paying sectors operate.’

The NLW is set as a proportion of typical worker earnings so if higher inflation drives a slowdown in real wage growth, as many predict, it would have knock-on effects for low-paid workers. The Resolution Foundation predicts they could be hit by a loss of up to 40p an hour.

Firms that rely heavily on EU migrant labour are also facing major uncertainty about how they will operate their business, including how they hire and pay staff.

The authors emphasise that post-Brexit, the ‘expertise of the independent Low Pay Commission is more important than ever, and ministers should carefully heed their advice.’

However, considering that the NLW was developed and launched last summer without meaningful consultation with the Low Pay Commission, further unilateral action by the government is not unlikely.

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