George Osborne recently announced this summer’s Budget and in that long speech was news of a new compulsory National Living Wage. The minimum wage currently stands at £6.50 which will be replaced by the National Living Wage and will rise to £9 an hour. This could mean a pay rise for millions of Brits although critics say it could sacrifice jobs as well incur up to £1 billion of costs to councils. The questions you probably want answers to about this are ‘what is it exactly?’, ‘when will it come in to affect?’ and ‘who does it apply to?’ So we thought we’d answer some of those questions for you:
What is the National Living Wage?
First, it might be helpful to understand why this new rule has come about. Many groups have been campaigning for a National Living Wage and this has been brought in as part of the chancellor’s plans for a ‘higher wage, lower tax, lower welfare’ Britain. It is supposed give workers a high enough wage to have a normal living standard, including paying for food, transport and bills.
How much will it be?
The National Living Wage will be introduced in stages. From next April it will be £7.20 which will rise to £9 per hour by 2020. However this figure is below the level of the current London living wage which is set at £9.15 and £7.85 in the rest of the country. The living wage is the amount needed to maintain a decent standard of living.
The national minimum wage currently at £6.50 will increase to £6.70 in October, as was announced in March.
The change will apply to people aged 25 and over. This will mean 2.7 million low wage workers over the age of 25 working 35 hours per week will receive a pay rise of approximately £5,200 (based on the current minimum wage of £6.50), according to the Treasury.
What about people under 25?
People aged 24 and under won’t be affected by the new wage with the Treasury arguing that ‘the priority is to secure work and gain experience’ for this age group. The minimum rate for 18-20 year olds will increase by 17p from £5.13 to £5.30 in October and for 16-17 year olds it will go up from £3.79 to £3.87, an increase of 8.
Is this good news or bad news?
At first glance a national wage increase is anything but good news when seeing how many people currently on low ages could benefit. However there has been some criticism. The Office of Budget Responsibility has predicted that 60,000 jobs will be lost as a result of the change. Although George Osborne states the effect of the Budget will offset the losses predicting that 1.1. million jobs will be created. Critics have also argued that firms will start looking to recruit more under 25s in order to sidestep the increased employee wages.
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