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New plans for national living wage ahead

Ahead of a possible election, the Conservatives release their plan for national living wage

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Image Credit: Richter Frank-Jurgen

Last week Sajid Javid, the Chancellor of the Exchequer, announced that he was planning to raise the National Living Wage to £10.50 within the next five years. Alongside the increase, he pledged to lower the age for which this comes into effect from 25 to 21.
This bold move from the Conservative Party received praise from the Prime Minister despite being generally against their pro business approach to the economy. When minimum wages were originally introduced in 1999, many liberal economists raised fears that it would crush small businesses due to a drastic increase in their cost of labour, resulting in a sharp increase in unemployment as firms reduce their workforce in favour of other cheaper methods of production.
In fact the unemployment rate fell year after year, only returning to its 1999 level in 2010 due to the crash. That being said, some economists such as Tim Harford argue that although there was no economic downturn then, it should not embolden us to go further now. He stated in a Financial Times article that when the original living wage was increased it only affected a few hundred thousand workers, but that this new policy would affect over two million.
With this new sudden and fairly drastic increase from the previous level of £8.21, especially considering the current uncertainty surrounding the UK economy, it is unusual that there is seemingly so little resistance to the new policy. But the other major party in the House of Commons, Labour, are of course pro National Living Wage and would destroy relations with their Unions if they attacked this policy or its timing.
Many pundits believe this sudden change of heart by the Conservative Party is due to an attempt to shift public opinion in order to break the deadlock surrounding Brexit. This was echoed by the Chancellor of the Exchequer during his speech when he said “It’s the Conservatives who are the real party of labour. We are the workers’ party.”
Labour’s answer to this popularity contest for the low-income earners’ votes in a potential election was to promise a more drastic drop in the age bracket to include all workers under 18 also, but of only £10 across the board.
Otherwise Mr Javid promised that he would honour pledges made by his predecessor and invest £25 billion in the road networks spread across England. He also announced investment to improve bus networks and a £5 billion boost to digital infrastructure to ensure even some of the hardest parts of the country are reached by the networks.

2009

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