The TUC has called the increase to the minimum wage ‘a welcome step’ but maintain that many of the lowest paid workers will still be left poorer overall because of cuts to their tax credits.

Three in every ten (29 per cent) female employees in the country are set to receive pay rises as a result of the new ‘National Living Wage’, according to a new report published today by independent think-tank the Resolution Foundation.

The new measure, which was announced in July’s Budget, is set to lift the pay floor for workers aged 25 and over from April 2016 onwards. It will initially be set at £7.20, 50p above the National Minimum Wage which will be £6.70 from October 2015, and will rise to an expected value of around £9.35 by 2020.

New analysis by the Resolution Foundation finds that 6 million people – around 23 per cent of all employees – will receive some form of pay rise by the end of the decade as a result of the policy. Of these, 3.2 million are expected to be earning less than the National Living Wage and gain directly by having their pay lifted to at least that level. The average annual cash gain will be £1,210 (though it will be far higher for those working full-time who are currently on the minimum wage).

However, the Foundation estimates that a further 2.8 million employees who already earn at or above the National Living Wage will also benefit from a ‘ripple effect’, as employers aim to maintain pay gaps between different workers. The average cash gain for these employees will be £240 by 2020.

Women are expected to account for 3.7 million of those receiving a pay rise – representing 61 per cent of the total and nearly three in ten of all female employees – because of their higher concentration among the low paid. A lower proportion of male employees will gain, with 2.3 million (18 per cent) expected to see their earnings boosted.

The Foundation estimates that the distribution of gains will contribute to a modest narrowing of the gender pay gap over the coming years. From 2014 to 2020, it is expected to speed up the pace at which the gap narrows by up to one-fifth.

francis o'grady

“Ministers have a lot more to do to make sure that Britain has a decent pay” – Francis O’Grady

Commenting on the research published today, TUC General Secretary Frances O’Grady said:

“The TUC has long argued that Britain needs a pay rise, and the new supplement to the minimum wage is a welcome step forward. But despite the pay gains, many of the lowest paid workers will still be left poorer overall because of steep cuts to their tax credits.

“Ministers have a lot more to do to make sure that Britain has a decent pay, decent jobs economy. Workers need stronger rights to collective pay bargaining, and the government must get tougher on exploitative zero-hours contracts. This will help ensure a stronger and fairer recovery that works for everyone.”





James Marsh is an HR consultant and currently leads the editorial team at HRreview.

An avid HR blogger and tweeter on HR and management issues, James has worked as an HR manager, consultant, in-house recruiter and trainer and has expertise in both management strategy and HR policies and processes. He has a BA from the University of Nottingham in American Studies, a Masters in Human Resource Management from the University of Westminster and is a member of the Chartered Institute of Personnel and Development (CIPD).

James is also the regular chairperson of HRreview's series of webinars that discuss and debate the latest HR trends and issues, InsideHR.