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Conservatives' pay rise pledge for low-paid workers 'won't cost jobs'

Tom Belger
Finance and policy reporter
UK chancellor Sajid Javid. Photo: Ben Stansall/AFP via Getty Images

The UK government’s plans to hike wages for millions of low-paid workers by raising the minimum wage are unlikely to put jobs at risk, according to a report.

A government-backed review found similar hikes in the legal minimum organisations have to pay their staff had “negligible or zero” impact on employment levels in Germany, the US and other countries.

The timing of the announcement by the Treasury is likely to raise eyebrows, coming just weeks before the governing Conservatives head to the polls.

But the department said in a press release the findings, due to be published on Monday, were from an independent review by leading academic Arindrajit Dube.

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Chancellor Sajid Javid announced plans earlier this year to raise the minimum wage, now known as the national living wage, to two-thirds of the median average UK salary by 2024. The move would take it to £10.50 an hour in five years’ time on current projections.

Professor Arindrajit Dube said: “Based on the overall evidence—with a special emphasis on the recent, high-quality evaluations of the national living wage (NLW) and other more ambitious policies internationally—my report concludes that that there is room for exploring a higher NLW in the UK up to two-thirds of the median wage.

“It will also be important to empirically evaluate and recalibrate any such ambitious policy based on new evidence down the road.”

Javid said the review showed “the evidence is clear that our approach is the right one,” and promised to “end low pay.”

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The introduction of UK minimum wage legislation under Labour in the 1990s sparked fears of heavy job losses that are now widely seen to have been misplaced.

The wage floor has secured broad cross-party support ever since. But in recent years wage hikes have been above inflation, grown increasingly politicised and left business leaders frustrated.

There is also a gap between the legal minimum and the so-called ‘real living wage,’ the minimum experts say people need to get by in modern Britain.

Around one in five UK jobs pay below the current ‘real’ living wage of £9 an hour or £10.55 in London, according to new separate figures.

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But a KPMG study out on Monday showed the gap between this level and the legal minimum has fallen to a seven-year low.

John McDonnell, Labour’s shadow chancellor, said the five-year wait to reach two-thirds of average incomes was an “insult to our hard-working people.”

He said: “It's a derisory offer which people will have to wait years for.

“Labour will immediately introduce a real living wage of £10 an hour for everyone 16 and over, outstripping every publicity stunt figure the Tories invent."