The prime minister’s plan was announced by Chancellor Sajid Javid at last month’s Conservative Party conference in Manchester, where he said the Tories would “make the UK one of the fist major economies in the world to end low pay altogether”. Prof Arindrajit Dube of the University of Massachusetts Amherst looked at how economies were impacted when minimum wage workers were given a boost. He said while there there are always concerns over businesses being hit hard by a raise for employees, the overall evidence suggested Britain’s job market would be able to cope with the effects.
In a statement Prof Dube said: “Based on the overall evidence—with a special emphasis on the recent, high quality, evaluations of the national living aage 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.”
In his report, commissioned by the Treasury, he did not set out when an increase of pay should be offered to workers.
The government has said it will roll out the change over the next five years.
And he did not establish what the “magic number” – the exact amount of the increase – should be.
In an interview with BBC Radio Four’s World at One programme, he said: “We know that raising the minimum wage increases earnings at the bottom of the pay scale but the worry is that when that happens, employers start cutting back jobs and hours and that ends up being partly an unintended consequence of raising the minimum wage.
“So what I did is in the report. I looked at the most up-to-date body of research from the UK, from the US, other developed economies, to really try to get a sense of what happens when you set the minimum wage at fairly high levels, at least at much as the data permits.”
He said after studying the data, he found there was “room for exploring a more ambitious national living wage in the UK” and added that, in general, raising the national living wage “has been a success story” and does not have “any pronounced impact” on employment levels.
Mr Javid, who had said the change would hand 400 million people a “well-earned pay rise” said Prof Dube’s report proved the Conservatives’ plan would work.
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He said: “The evidence is clear that our approach is the right one.
“We will end low pay by putting the National Living Wage on a path to increase to £10.50 over the next five years.
“I thank Professor Dube for his important work and recommendations.”
Labour slammed the findings, branding the five-year timeline “an insult” to workers and pledged to offer a better deal if they are voted into power in the December 12 general election.
Shadow chancellor John McDonnell said: “This is an insult to our hard working people.
“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.”
The minimum wage, which people aged 25 and over are eligible to earn, stands at £8.21 per hour.
The Conservative Party has promised to expand that reach to all workers aged 21 and above.
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