Theresa May and Jeremy Corbyn must show caution in their minimum wage plans, the IFS has warned

 
Mark Sands
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Future Of The Penny In Doubt
The UK will head to the polls on 8 June. (Source: Getty)

Prime Minister Theresa May and Labour leader Jeremy Corbyn have been urged to show caution in planning to hike salaries around the election.

The highly-respected Institute for Fiscal Studies has warned that any increases to the minimum wage could have unintended consequences, including increasing unemployment.

Both Labour and the Conservatives have plans to increase salaries through the next parliament, with the former having set a goal of launching a £10 minimum wage by 2020.

Meanwhile, the 2015 Budget saw then-chancellor George Osborne commit the Conservatives to a National Living Wage, which affects only over 25s, reaching 60 per cent of median hourly earnings in 2020, currently forecast to be £8.75.

However, the IFS has raised concerns about both plans. “Under Conservative plans, and to an even greater extent under Labour, the minimum wage would rise well above levels seen before in the UK, and to amongst the highest levels in comparable countries. To implement these policies would be to take a risk,” it warned in a report published today.

“We do not know what the impact on employment and hours worked would be.”

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In the case of the Conservatives, the think tank warned the strategy of increasing the NLW annually gives little chance to assess its impact before fresh rises come into effect.

Labour's £10 minimum wage was labelled “inflexible” with the IFS warning it would be set regardless of the performance of the economy.

But Corbyn's party would also apply the £10 wage to all workers, with the level set by a new “living wage review body”, causing the think tank to warn that his misunderstands the concept of a living wage altogether.

“It does not take account of the number of people who would actually be able to obtain employment at such a wage in the first place. Setting a key economic policy without regard to its most potentially harmful outcome is not sensible,” the IFS said.

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