The government's new national living wage (NLW) will offer little relief to workers, according to a new report by the Institute for Fiscal Studies (IFS).
The IFS said any benefits for employees on the new minimum wage would barely offset the negative impact of other changes proposed by chancellor George Osborne to the tax and benefit system.
IFS researchers found that in households with someone in paid work, those eligible for benefits and tax credits stand to lose an average of £750 per year from the changes to tax and benefits, but gain only £200 per year in additional income from the national living wage.
In other words, on average, they will be £550 worse off under the government’s proposals.
William Elming, a research economist at the IFS, said:
“There may be strong arguments for introducing the new NLW, such as increasing earnings and the incentives to work for the low paid.
“However, the new NLW cannot be considered a direct substitute for benefits and tax credits aimed at lower income households,” he added.
Osborne’s National Living Wage is set to go into effect for over-25’s at £7.20 per hour in April of next year, increasing to £9 per hour by 2020.