The Resolution Foundation has today called on the prime minister to “stick to her guns”, warning watering down the policy could result in low-paid workers losing out on up to £1,000 a year.
The message comes after 16 trade associations wrote to new business secretary Greg Clark last month urging him to “exercise caution” in hiking the NLW and as confusion mounts over how fast the wage will go up following the EU referendum.
The government’s aim is for the NLW, currently £7.20 an hour for those aged over 25, to reach 60 per cent of median earnings by 2020. When he announced the policy former chancellor George Osborne was clear this should be equivalent to at least £9. But now, following the uncertain outlook for employment caused by the EU referendum, the twin targets have caused concern among employers who fear they may not be able to meet the burden.
The new report prompted major business lobbies, the Institute of Directors (IoD), the CBI, the British Chambers of Commerce and the EFF, to reiterate their calls for the government to act cautiously in setting minimum wages.
“The Brexit referendum has unleashed a period of considerable uncertainty for employers,” said the IoD's Seamus Nevin. “The IoD and our members continue to support the NLW but we are apprehensive about the potential for an increase in unemployment.”
Nigel Keohane, research director at the Social Market Foundation added: “The scale of the challenge for employers posed by the NLW is immense. Having two targets for 2020 - one for £9 an hour and another for 60 per cent of median wages - is proving increasingly problematic because of the uncertainty over earnings growth.”
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Pointing out that the official policy only commits the government to meet the 60 per cent target, the Resolution Foundation warned “pursuing a cash target of £9 or higher in the face of weaker overall wage growth … could jeopardise the success of the NLW”.
The Low Pay Commission (LPC), which has the official task of recommending both the NLW and the traditional minimum wage bands, which apply to workers under the age of 25, will meet in October to advise the government on the levels which should be introduced from next April.