Labour’s new plan would give 5.6 million working people a pay rise, and save the taxpayer £40bn a year

Construction workers
Kerry-anne Mendoza

The Labour Party has found a way to give 5.6 million working UK citizens a much-needed pay rise, by raising the minimum wage to £10 an hour. In doing so, it could save the taxpayer £40bn in welfare paid to working people whose wages leave them in poverty.

A £10 minimum wage

Announcing the policy at living wage employer Luton Football Club on 10 April, Labour leader Jeremy Corbyn stated:

The government’s re-branding of the minimum wage to the national living wage hasn’t dealt with the real problems of low pay and rising cost of living.

That’s why Labour will raise the legal minimum wage for all to at least £10 an hour by 2020, giving more than five and a half million people a pay rise in the process.

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Labour’s real living wage will immediately boost the incomes and opportunities of more than 20 per cent of the workforce, especially in sectors such as retail, care and hospitality.

We know that where work pays, living standards rise and reliance on benefits falls. This is the right thing to do and a Labour government will be committed to re-balancing our economy so that no one and no community is left behind.

Under Theresa May’s current economic plan, the poorest people in Britain will see their incomes shrink by more than 10% by 2021. While the wealthiest will see theirs grow by 5%. Labour’s plan would put a reverse gear on that expanding wealth gap.

The economic impact

Those on the right argue that Labour’s plan would put undue wage pressure on firms and lead to a fall in employment, damaging the economy. Such arguments were made in advance of the existing minimum wage. And were proven untrue.

Mainstream economists argue the opposite. Pay increases can be sustainable, and positive for the economy as a whole.

Currently, just two regions of the UK economy are better off than before financial crisis of 2007. Unsurprisingly, they are London and the south-east.

Every other region is worse off, and some are in depression.

This has mirrored a startling wage crash. Between 2007 and 2015, UK wages fell 10.4%. The only other OECD country to see worse wage performance was Greece. Increasing the wages of the poorest workers benefits every region of the UK economy, instead of just one or two.

Furthermore, a pay rise could save the taxpayer up to £40bn a year.

When employers pay less than a living wage, it is the the taxpayer that picks up the bill. Of the £44bn we spend each year on benefits for working-age people, just £3.5bn goes to people without jobs. Almost all welfare spent on working-age people goes to the 3 million people working for wages that leave them in poverty.

We should all agree that the burden of wages should fall on the employers profiting from the work. And not the state. Labour’s policy would shift that burden where it belongs.

Get Involved!

You can join the Labour party here.

Learn more about Momentum here.

Write to your MP about this policy here.

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