National Living Wage should be scrapped, think tank says

The Government's plan to move to a National Living Wage worth more than £9 an hour by 2020 should be abandoned, according to a think tank.

New research from the right-of-centre Institute of Economic Affairs (IEA) bemoans the "politicisation" of pay as it also calls on Theresa May to cancel proposals to publish "crude league tables" detailing the gender pay gap.

George Osborne last year announced the introduction of a National Living Wage, coming into effect in April 2016 at a rate of £7.20 an hour for people over the age of 25.

It is due to increase to more than £9 an hour by 2020.

But the report suggests the National Living Wage has been introduced "even though there is scant evidence that it is an effective tool to alleviate poverty".

It also warns that the wage could pose a threat to jobs and hours as companies look to cut back to cover planned increases.

It states: "Apart from increased risks to jobs and hours at projected wage rates, the National Living Wage is already leading to increased politicisation of low pay."

The report suggests the move to the National Living Wage "should be abandoned" while recommending the National Minimum Wage should be simplified.

It states the National Living Wage "does nothing for those out of work or many of those working part-time or in poverty".

It also calls on the Government to scrap the planned publication of "crude league tables" charting the gender pay gap because there is "little evidence that the gender pay gap results from discrimination".

Report author Ryan Bourne, IEA 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 a specific job, pay policy is being driven by popular misconceptions, such as that pay levels are determined by discrimination, or that pay should compensate workers for their living costs."

Jon Trickett, Labour's shadow business secretary, accused the IEA of "scaremongering".

He said: "With workers in Britain suffering poor wage growth and record levels of in-work poverty, a living wage has never been more urgent.

"Let's be clear, the Government's living wage does not go far enough but, for millions of workers, it will mean not having to choose between heating the house and putting food on the table.

"When Labour introduced the minimum wage in 1999, there was vocal concern about the threat it posed to jobs and businesses. These never came to pass.

"The IEA report is yet more scaremongering and ignores the fact that fairly-paid employees are more productive, and that a race to the bottom is bad for workers and businesses alike."

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