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:

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.

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.

2. 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 25^th (£9.66) and the 30^th 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.

(*) 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

3. 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.

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

4.   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 30^th (£9.67) and the 40^th (£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.