The introduction of a £15 per hour minimum wage would improve the public finances by more than £25bn and make up for a “lost decade” of wage rises amid the ongoing cost-of-living crisis, according to a new report.
The research, published today by the Progressive Economy Forum (PEF), found that 14 million people would see their pay increase as a result of the change. The report, titled The Case for a £15 an hour Minimum Wage, was co-authored by PEF director James Meadway and Landman Economics director Howard Reed.
Meadway and Reed concluded that the proposal, raising the minimum wage to £15 by 2024, would not only compensate low-paid workers for reductions in their wages over the last ten years but also help to reduce the prevalence of low-paid and insecure work in the UK labour market and protect living standards from inflation.
Their analysis suggested that the policy would be affordable as it would raise an additional £32.7bn from income tax and National Insurance contributions while reducing government spending on income-contingent benefit payments by £4.2bn.
The research found that the overall impact of the raising the national minimum wage to £15 per hour, factoring in the resultant increase in the public sector pay bill, would be a £25.1bn boost to the public finances.
Commenting on the report, Labour MP Clive Lewis said: “Until the political will exists for reform of the UK’s economically damaging anti-trade union legislation, a new and enhanced minimum wage floor is urgently needed.
“Whilst the moral case for a £15 an hour living wage should not be in question, the economic one, for many, has been. And yet the evidence presented in this report for both, is now overwhelming.”
PEF’s modelling indicated that the change would be “strongly redistributive”, with the poorest 70% of households estimated to receive a 6.9% increase in their incomes compared to a 1.7% rise for the richest 30%.
The report’s authors also argued that it would contribute to efforts to ‘level up’ the country as 51% of employees in the North of England would benefit compared to 33% of those living in London.
They concluded that the increase could be phased in over the next two years to give businesses time to adjust. They also suggested that smaller businesses could be compensated using the additional tax income to cover their increased costs.
Labour MP Nadia Whittome said: “After years of stagnant wages and now rapidly rising prices, a £15 an hour minimum wage has the potential to lift millions out of poverty. This research shows that it’s exactly the kind of bold policy intervention the government should be considering to help tackle the cost-of-living crisis.”
Labour MP for Coventry South Zarah Sultana described the research as “ground-breaking”, adding that: “The Tories like to talk about levelling up, but a £15 an hour national minimum wage by 2024 would actually do it.”
This cost-of-living crisis is unprecedented.
Poverty pay is rife and the national minimum wage isn’t enough.
We need a real living wage, and Progressive Economy Forum's research shows that it should be £15 an hour by 2024.
— Progressive Economy Forum (@PEF_online) June 8, 2022