Conservatives Pledge National Minimum Wage

As the Conservative Party conference got underway, the indications were clear that the Tories, following the direction of Prime Minister Boris Johnson, are positioning themselves to fight a general election.

 With the declaration of an end to austerity, the normal pre-election promises were made: more money for the NHS, an increase in police numbers and a levelling up of school funding, to pick just a few.

The most striking pledge however, was that made on Monday by the Chancellor of the Exchequer Sajid Javid, who promised to drastically increase the national living wage and make changes to the age threshold at which it can be earned.


Before we evaluate the merits of these new policies, let’s first have a look at the detail.

By 2024, Mr Javid has committed to: Increasing the national living wage from £8.21/hour to £10.50/hour; Lowering the age at which a worker can start earning the national living wage from 25 to 23 by 2021 and Lowering the age at which a worker can start earning the national living wage from 23 to 21 by 2024.

These proposals would transform the British workforce into one of the most highly compensated in the world.

The Living Wage Foundation has welcomed this proposal as it brings the official wage rate into line with their estimations of a ‘real’ living wage, currently set at £10.55/hour in London and £9.00/hour outside of London.

Furthermore, the treasury itself estimates that around 4m people will benefit positively from the proposals, each gaining on average an extra £4,000 per year.

However, the treasury is yet to say how much this will cost government and businesses, nor could the Chancellor answer this question on Monday following his speech.

The director general of the British Chambers of Commerce added that,

“companies already face significant cumulative employment costs . . . so government must take action to alleviate the heavy cost-burden facing firms, or risk denting productivity and competitiveness,”

signalling that businesses have real concerns about how much these new proposals will cost them.

Moreover, if these costs are passed onto the consumer, the lowest paid will still be affected by higher prices.

With the Labour Party planning a similar increase to £10/hour and lowering the age threshold to 18, these concerns need to be addressed in order for proposals to benefit those intended.

Nevertheless, it would seem that the Tories are genuinely prepared to support their declaration that the period of austerity following the financial crisis has now come to an end.

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