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Minimum wage increase should be delayed ‘to help firms through Covid-19 crisis' - think tank

The National Living Wage is due to rise from £8.21 to £8.72 per hour on 1 April (PA)

2 min read

The planned increase in the minimum wage should be delayed by six months to help firms in low-paying sectors during the Covid-19 outbreak, a leading think tank has urged.

The National Living Wage (NLW) is due to rise from £8.21 to £8.72 per hour from 1 April, a move the Resolution Foundation says will significantly increase labour costs for the companies worst-hit by coronavirus.

They explain that the while the high-paying financial sector suffered during the last economic crisis, this one will have a disproportionately high impact on the hospitality, leisure, travel and retail sectors.

“This means that rises in the legal wage floor are highly relevant to how many firms weather the economic storm,” the group said in its earnings outlook.

“Exploring the case for delaying the rise in the NLW, the outlook notes that increasing the NLW by six per cent next Wednesday will significantly increase labour costs for low-paying firms badly hit by the crisis. 

“This is particularly true for the hospitality sector, which accounts for one in five minimum wage workers, and has been completely grounded by the government lockdown.”

They said the wage rise risks undermining the Government’s plans to help firms, such paying 80% of furloughed staff wages, by pushing them towards laying off employees.

Increasing the minimum wage would help families at a time budgets are being stretched by the impact of the virus, but the foundation say that for some the difference in earnings “would be more than offset by the social security boosts announced by the Chancellor last week”.

But they say companies unaffected by the crisis should go ahead and pay the higher rate from next week anyway.

Nye Cominetti, senior economist at the Resolution Foundation, said: “The scheduled increase in the National Living Wage next Wednesday to £8.72 an hour will deliver another big pay boost to millions of workers – and represents a landmark moment for a minimum wage policy that the Foundation has long supported.

“But the scale of the current economic crisis puts the latest rise in new a light. Increasing cost pressures for low-paying firms directly affected by the Government lockdown risks pushing them towards making job losses – something we all want to avoid.

“The Government should therefore announce a six-month delay to the upcoming National Living Wage increase. 

“This could provide welcome respite for firms in hard-hit sectors like hospitality and leisure, and give them another reason to hold onto staff during this deep, but temporary, economic crisis.”

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