National living wage has caused biggest fall in low pay since 70s, says thinktank

Phillip Inman
Former chancellor George Osborne publicises the national living wage at Asda in April 2016. Photograph: Joel Goodman/PA

More than 300,000 people on low incomes were given a pay boost by the government’s new “national living wage”, dispelling fears that the move to raise minimum salary levels would trigger widespread job losses.

The Resolution Foundation said Britain had experienced its biggest fall in low pay since the 1970s following the introduction of the national living wage (NLW), which imposes a floor of £7.50 an hour for employees aged 25 and over. The thinktank found that 5.1 million or 19% of workers were low-paid, down from 5.4 million, or just under 21%, last year, bringing the share of employees who are low-paid below one in five for the first time since the 1980s.

Women make up the majority of low-paid workers, at 61% of the total, which the foundation said had changed little over the last few years. The proportion of men reflects their more recent shift into low-paid work previously dominated by women.

But the foundation argued that Britain remains too reliant on low-paid work because more than five million employees earn less than two thirds of the median hourly wage of £8.25.


The thinktank said the number of people earning below the voluntary living wage reached a record high, rising from 6 million to 6.2 million. Calculated by the Joseph Rowntree Foundation, the voluntary living wage is the amount needed to achieve an acceptable standard of living, pegged at £17,900 per year for single people and £20,400 each for couples with two children

The former chancellor George Osborne introduced the NLW in April 2016. At the time, business leaders in the retail and hospitality sectors accused the government of introducing a tax on jobs that would result in thousands of employees being made redundant.

However, since the NLW took effect, employment has risen and unemployment has fallen to its lowest level for 40 years.

Conor D’Arcy, the Resolution Foundation’s senior policy analyst, said: “Many people warned that the national living wage would be a jobs-killing disaster. It’s early days still but the result so far has been the biggest fall in low pay for four decades, in an economy where employment is at a record high.

“While it’s important to celebrate the national living wage as a bold, positive policy action, we shouldn’t get complacent. As well as the challenges it presents to some employers, more than four million workers are still expected to be in low pay by 2020, and the old problems of women and part-time workers being far more likely to be low paid than men remain,” he said.

Young people have seen a boost to their pay, despite the NLW only legally applying to those aged 25 and over. The analysis finds evidence of a “domino effect” on those aged 16 to 20, with a 3% fall in their low-pay risk since last year, though three quarters of this group are low paid.

While progress has been made across the country, sizeable gaps remain across nations, regions and cities. Yorkshire and the Humber, and the East Midlands are the regions with the highest share of low-paid employees, with 24% of employees falling below the low-pay threshold in each. At the other end of the spectrum, just one in 10 employees in London is low paid. Among city regions, Sheffield (24%), Nottingham, Liverpool and Newcastle (all 23%) are at the top of the low-pay table.

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