Following announcements from Labour and the Conservatives, the Institute for Fiscal Studies has propagated caution when it comes to increasing the minimum wage. The Conservatives have promised to raise the minimum wage and the living wage considerably, and Labour has gone even further with its proposed increases.
The Ifs has been extremely critical of such moves, particularly of Labour's proposed increase in the minimum wage to £10 per hour by 2020. Fearing that many employers would simply not be able to afford these increases, the IFS has warned that many low-paid workers could end up losing their jobs.
Instead, the IFS recommends keeping basic pay increases in line with the recommendations put forward by the Low Pay Commission. Since its inception in 1999 right until 2015 minimum wage increases based on the commission's recommendations occurred regularly without negatively impacting on job creation.
The IFS considers even the smallest increases outlined by the Conservatives as a step too far and has been scathing about Labour's proposed increases.
Minimum wage and living wage increases
What are the parties proposing?
Currently, the minimum wage is £7.20 for people aged 25 and over. While many see Labour's proposed increase to £10 as a step too far, the IFS has also warned against the Conservatives' plan to raise it to £8.75 by 2020.
Emphasising that the impact of sharp increases were hard to foresee, the IFS outlined its concerns:
"There may well be a case for higher minimum wages than we had up to now. But we do not know at precisely what point a higher minimum wage will start having serious negative employment effects."
The well-respected ThinkTank went on to outline its fears that the very people who are to benefit from such increases could end up losing their jobs and be worse off.
HMRC crackdown on companies failing to pay minimum wage
The HMRC has been cracking down on companies failing to honour their obligation to pay the minimal payment rates. This year, for the first time, it adopted a "name and shame" approach and published the names of many well-known employers.
Among those on the list were Debenhams and Peacocks, while Argos ended up paying £2.4 million in additional wages and a £1.5 million fine to the HMRC.
John Lewis announced a cut in profits of £36 million to come in line with its obligations on basic wage payments.
IFS wants to review pay rates annually
After issuing its criticism, the IFS argued that it would be wiser to adhere to the understanding previously reached between unions, employers, and government and review the minimum wage each year on low pay commission.
