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“Tread carefully” on minimum wage increases, warns IFS

By Rachel Lawlerminimum wage increases

Proposals to raise the minimum wage to more than £10 an hour could “end up hurting the very people they hope to benefit,” according to a new report from the Institute for Fiscal Studies (IFS).

Both the Conservative and Labour parties have pledged to increase the minimum wages if elected next month. The Labour party plans to increase a £10 minimum wage for all employees aged 16 and over, while the Conservative party plans to increase the National Living Wage to two-thirds of the medium hourly wage.

The IFS has warned that both plans would “take us into unchartered waters” and cautioned that at some point, high minimum wages would start to reduce employment levels.

Currently, the National Living Wage and National Minimum Wages are set based on recommendations from the Low Pay Commission.

The IFS noted that minimum wage increases would “most likely” benefit middle- and higher-income families, as many low-income households will see a reduction in benefits, including universal credit, if their wages rise.

Women and part-time workers would be the most affected by the increased wages, with a third of women aged 21 and above and nearly half of all part-time employees expected to be affected.

Under Labour’s policy, nearly 30% of staff employed in the private sector would have their wages set my the national minimum rates, while the Conservative plans would see 20% of all staff in the private sector on the national living or national minimum wage.

The IFS warned: “If parties engage in a bidding war over minimum wages, they may end up hurting the very people they hope to benefit.”