Sunday 17 November 2019 / 12:38 PM Uncategorised

Labour’s Real Living Wage will give workers at least £9,000 more than the Tories by 2024

Labour’s Real Living Wage will give workers who earn the national minimum wage at least £9,000 more by 2024 than the Tories.

Coupled with Labour’s pledge to not raise income tax or national insurance contributions for the bottom 95% of earners, this means a worker on the minimum wage will be at least £6,000 better off after tax.

Analysis of latest ONS figures on earnings also shows that Labour’s pledge to immediately introduce a £10 an hour Real Living Wage for all workers over 16 will give approximately 7.5 million people a pay rise, including over 1.2 million young people.

The analysis also shows that Labour’s Real Living Wage disproportionately benefits workers outside London and the Southeast, with around a third of workers in the majority of regions and nations benefiting.

Workers who currently earn a minimum wage job would get an immediate pay rise of between £3,444 and £5,986:

  • 16-18 year olds will get an average pay rise of £3,497
  • 18-20 year olds will get an average pay rise of £5,986
  • 21-24 year olds will get an average pay rise of £4,485
  • Workers 25 and over will get an average pay rise of £3,444

The current minimum wage for people 25 and over is £8.21 while for 16-17 year olds it’s £4.35.

With the Tories residing over the worst decade for wages since the Victorian era and in-work poverty soaring, Labour will give millions of low paid workers the pay rise they deserve.

 

Jeremy Corbyn, Leader of the Labour Party, said:

“Labour’s Real Living Wage will put more money into the pockets of the workers that need it most and give a boost to the economy.

“Over the last decade the Tories have allowed in-work poverty to soar and left millions in insecure jobs.

“Labour will deliver real change for the many, not the few.”

 

Cat Smith, Labour’s Shadow Minister for Youth Affairs, said:

“A decade of Tory austerity has made life much harder for young people, with many young workers crippled with debt and resorting to food banks.

“Thousands of young workers face out-and-out discrimination, receiving lower wages than older colleagues for the same day’s work.

“We believe all young people deserve a wage they can live on and that workers should be rewarded for their work, not their age.

“The next Labour government will stand up for young workers by abolishing the youth rate of the minimum wage and immediately introducing a Real Living Wage of £10 per hour for everyone from the age of 16.”

Ends

  

Notes to Editors

  1. Workers will be at least£9,000 better off with Labour

 

  • Assuming the Tories increase the current minimum wage of £8.21 at a linear rate to their proposed £10.50 by 2024, pay for minimum wage workers will rise by £8,904.79 under Labour.
  • As the table below shows, average annual pay is above the income tax and NICs threshold in every year, so the extra pay will be taxed at the basic rate of income tax and lower rate of NICs. Net of tax, this means workers will be at least £6,055 better off.

 

FY OBR earnings  Labour RLW uprated by average earnings (£) Tories minimum wage (£) Annual hours worked Average annual pay with Labour (£) Average annual pay under Tories (£) Difference (£)
2019/20 3.0 8.21 8.21 1664      
2020/21 3.1 10 8.67 1664 16640 14423.552 2216.448
2021/22 3.1 10.31212409 9.13 1664 17159.37448 15185.664 1973.710481
2022/23 3.2 10.63918805 9.58 1664 17703.60892 15947.776 1755.832918
2023/24 3.3 10.98972078 10.04 1664 18286.89538 16709.888 1577.007382
2024/25 3.1* 11.33040213 10.50 1664* 18853.78914 17472 1381.789139
Total         88643.66792 79738.88 8904.787919

 

OBR earnings data from March’s Economic and Fiscal Outlook, https://obr.uk/efo/economic-fiscal-outlook-march-2019/

Annual hours worked are also taken from March’s EFO

(*) As the OBR’s forecasts only go up to 2023/24, but as the forecasts are relatively stable, it’s reasonable to take the average of the previous five years to get an estimate of earnings and hours worked for 2024/25.

 

  1. Seven and a half million workers will get a pay rise, including 1.2 million young people

 

  • An estimate of the total number of workers who earn below £10 and who will benefit is taken from the ONS’s 2019 Annual Survey of Hours and Earnings, table 6. The ASHE includes percentile distributions of hourly earnings, and from this we can work out where someone earnings £10 an hour would fall between two percentiles. For instance, for all employees, £10 an hour falls between the 25th(£9.66) and the 30th percentile (£10.20). If you then assume that pay increases at a linear rate between these percentiles, then we can estimate that 28.1% of workers, or 7,517,000 earn less than £10 an hour.

 

  • Estimates of the numbers who gain for each age group use the same methodology.

 

Age range Number of workers earning below £10 an hour
16-17 277,000
18-21 952,000
22-29 1,491,000
30-39 1,378,000
40-49 1,271,000
50-59 1,406,000
Over 60 700,000
All ages 7,517,000*

 

(*) the estimates for each percentile may not sum to the overall estimate, as estimates for each percentile assumed a constant distribution between the percentiles directly above and directly below £10. This assumption is unavoidable and its accuracy is unlikely to significantly affect individual estimates.

 

https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earningsandworkinghours/bulletins/annualsurveyofhoursandearnings/2019/relateddata

 

  1. Workers on the National Minimum Wage would get an immediate pay rise of over £4,000

 

  • Average annual gain for workers on minimum wage is calculated by finding an average for the hourly gains made by a worker on minimum wage for each of the current rates multiplied by an estimate of the median hours worked from the ASHE.

 

  Current minimum wage Labour’s £10 an hour Real Living Wage Hours worked Weekly gain Annual gain
16-17 4.35 10 11.9 67.235 3496.22
18-20 6.15 10 29.9 115.115 5985.98
21-24 7.7 10 37.5 86.25 4485
25+ 8.21 10 35.9 64.261 3341.572
        Ave 4327.193

 

https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earningsandworkinghours/datasets/agegroupashetable6

 

  1. Estimated number who gain in each region

 

  • Estimates of the numbers who gain in each region uses the same methodology as estimates for numbers in each age group.

 

  • The 2019 ASHE lists percentiles for hourly pay by region, and from this you can work out where £10 an hour falls between two different percentiles. In the North East this is between the 30th(£9.67) and the 40th (£10.67), and if we again assume that pay increases at a linear rate between these percentiles, then we can estimate that 33.3% of workers, or 330,000 earn less than £10 an hour.

 

Region Number of workers earning below £10 an hour % of total
North East 330,000 33%
North West 882,000 31%
Yorkshire & the Humber 697,000 33%
East Midlands 604,000 32%
West Midlands 685,000 31%
East of England 667,000 26%
London 619,000 18%
South East 915,000 24%
South West 694,000 30%
Wales 377,000 32%
Northern Ireland 305,000 34%

 

https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earningsandworkinghours/datasets/placeofresidencebylocalauthorityashetable8