Women and those based outside London and the South East set to be the biggest winners from the National Living Wage
This short analytical note shows that women and those based outside London and the South East will be the biggest winners from the government’s Budget announcement of a new national living wage (NLW) for all over-25s that will reach over £9 an hour by 2020.
This analysis, detailed in Table 1 below, shows that eight out of ten people who gain from the national living wage are based outside London and the South East, with the North West expected to see the largest number of people getting a pay rise. There, an estimated 350,000 people are getting a pay rise by 2020 while overall 750,000 people in the North are set to benefit directly from the policy.
In the Midlands 550,000 low paid workers are expected to see their salary go up by 2020, compared to 500,000 workers in London and the South East.
Across the country 2.7 million working people are expected to see a boost to their wages by 2020.
The analysis also shows 65% of winners are expected to be women.
The Chancellor made the surprise announcement of the new NLW in his Budget speech on Wednesday. From April 2016 workers aged 25 and above will receive a new premium on top of the National Minimum Wage (NMW) to take their pay to £7.20 per hour. The Chancellor has tasked the Low Pay Commission with then recommending annual increases in the level of the NLW to over £9 by the end of the decade.
That will mean a direct boost in earnings for 2.7 million low wage workers, and will mean that a worker currently on the NMW will earn £5,200 per year more in cash terms by 2020. The OBR also forecasts that in total up to six million people may see their pay rise as a result of the National Living Wage, with a ripple effect of higher wages up the income scale.
Welcoming these figures, the Chancellor of the Exchequer George Osborne, said:
Last week I delivered a Budget to move our whole nation from a low wage, high tax, high welfare economy to a higher wage, lower tax, lower welfare economy. Because we’ve taken tough choices to drive down borrowing, make our business tax competitive and reform welfare, I have been able to ask business to lift the wages of the lowest paid across the country.
Rebalancing our economy is central to our long term plan and that is why it is so important to me that it is in the regions outside of the capital, and in the Northern Powerhouse in particular, that most working people will stand to gain.
It’s also right that with more women in the workplace than ever, we do all we can to support them. Two thirds of those who will benefit from the new national living wage are women, which is something I hope everyone will celebrate.
Britain deserves a pay rise - and I am making sure it gets one.
Table 1. Number and share of people gaining from the National Living Wage by 2020:
|Number||% of workforce|
|Yorkshire and the Humber||250,000||12%|
The analysis uses microdata from the ONS’ ASHE survey for April 2014, which is then uprated with OBR economic forecasts of average weekly earnings growth and changes in hours worked over the forecast period to estimate the expected levels of hourly earnings in 2020. Workforce numbers are uprated to OBR whole economy forecast employment levels in 2020. As part of this committed increases in the NMW up to October 2015 are taken into account, which is then assumed to rise in line with hourly earnings thereafter. The analysis estimates a ‘pre’ and a ‘post’ wage distribution, and estimates the number of employees who are estimated to see an increase in hourly earnings post the introduction of the NLW. The number of jobs affected estimates are, of course, open to uncertainties over the forecast period.
You can find the relevant data for the ASHE survey here