The National Living Wage has arrived – why is it actually not as great as it sounds?

What’s not to love about a massive pay rise for Britain?

The National Living Wage (NLW) has come into effect, meaning those who are aged 25 and over will earn least £7.20 an hour from today.

This is a significant pay rise for 1.3 million workers from the National Minimum Wage (NMW) of £6.70 an hour.

George Osborne introduced the measure in the Summer Budget last year, and the chancellor plans for it to rise to £9 an hour by 2020.

However, the Living Wage Foundation, which is lauded as the inspiration for the NLW, said the amount is not enough to be a true living wage and called on businesses to pay better.

“The job is not done when it comes to tackling low pay,” said the foundation’s director, Katherine Chapman.

“Businesses who can afford to pay a rate that reflects the real cost of living should do so and join over 2,300 employers signed up to pay our higher voluntary Living Wage.

“For profitable business or those who see themselves as innovators and leaders, simply not breaking the law on pay is not enough. Many businesses want to aim higher.”

Other critics argue the NLW doesn’t extend far enough, as hard-working employees who are under the age of 25 are still subject to the NMW, even when doing exactly the same work as those aged 25 and over.

“Britain desperately needs a pay rise, and this increase is good news for those aged 25 or older,” said TUC general secretary Frances O’Grady.

“But the government must ensure that younger workers are not left behind; 21 to 24-year-olds will not be seeing an increase.

“This is not fair. Future wage increases must narrow the pay gap between old and young.”

It’s also likely to massively affect the economy.

Paul Johnson, director of the Institute for Fiscal Studies, told Radio 5 live: “This is going to have, in the longer run, a huge effect on the British labour market, because it’s going to affect such a large fraction of workers.”

While it will help many of the people currently in low-paid jobs, it’s likely to see a rise in the cost of everyday services for middle class people.

“It is also those doing dog-walking, babysitting, ironing, house-cleaning, gardening and housesitting, who are earning below the minimum wage,” said Colin Williams, professor of public policy at Sheffield University. “It is not some Orwellian exploitative employer who is employing this labour, but everyday middle-class purchasers of services.”

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