Think tank hits out at Living Wage

The continuing roll-out of the National Living Wage legislation should be scrapped, a think tank has argued.

A new report prepared by the Institute of Economic Affairs (IEA) has criticised ministers for “politicising” pay policies and estimated that the new statutory wage floor could cost 60,000 jobs across the UK in the coming years.

The IEA report said that it was important that the effect on employment they were forecasting was taken into consideration by the Government, who had previously placed emphasis on the benefits to low-paid workers.

Ryan Bourne, the think tank’s head of public policy, said: “Price controls in wage-setting have severe negative consequences.

“Regulations that try to influence wages in order to meet an arbitrary target will create perverse incentives in hiring and compensation decisions.

“Sadly, rather than accepting that employers and employees come to agreements about pay according to [the] specific job, pay policy is being driven by popular misconceptions.”

Under current proposals, the Living Wage will increase to £9 an hour for over 25s by the end of the decade, having already introduced a statutory minimum of £7.20 an hour earlier this year.

A government spokesperson said: “As the Prime Minister has made clear, this government is committed to building an economy that works for all, not just the privileged few.”