Due to the economic costs of Covid-19 the Low Pay Commission, the independent body which advises ministers on legal wage floors, said the government target to increase the national living wage to two-thirds of average earnings by 2024 could be in danger.
The chair of the Low Pay Commission, Bryan Sanderson, warned that an “emergency break” included in the target may need to be deployed if the outbreak causes sufficient damage to the economy.
“The ongoing Covid-19 pandemic clearly represents a very challenging set of circumstances for workers and employers alike, and will require us to review whether the emergency brake is required when we next provide our advice to the government,” he said.
Isn't it a wonder that those now classed as key essential workers, necessary for the smooth running of society are among the lowest paid and are now being stopped from gaining a few quid more for their sacrifices and the risks they have been taking.
Almost 3 million workers across Britain will receive a pay rise on Wednesday as the legal minimum wage rises more than 6%, which brought calls for a delay to protect jobs as the coronavirus outbreak escalates.
The Institute for Fiscal Studies and the Resolution Foundation – had urged the government to stage an eleventh hour U-turn, saying that postponing the rise would stop struggling businesses from laying off workers. Retailers are understood to have privately lobbied for a delay, while the British Beer and Pub Association urged the government to hold back to “prevent mass job losses and permanent pub closures.”
Tej Parikh, chief economist at the Institute of Directors, which represents business leaders, said that the legal wage floor must be set in tune with economic circumstances. "Should firms continue to struggle in the medium to long term, government may have to take another look at the current trajectory,” he said.
Once the coronavirus crisis has been overcome, the government could come under greater pressure to soften its targets.
Frances O’Grady, general secretary of trade union body the TUC, said wage rises were needed to support millions of low-paid workers struggling to make ends meet as the pandemic spreads.
“Britain is indebted to its army of minimum wage heroes. Many – including care workers and supermarket staff – are currently on the frontline of the battle against coronavirus. They deserve every penny of this increase, and more,” she said.
Economists expect the fallout from Covid-19 to trigger a drop in average pay, eroding living standards across Britain.
Thomas Pugh, of the consultancy Capital Economics, said average pay packets could fall by 2% in the coming months before recovering slightly later in the year. He said earnings growth for 2020 as a whole is expected to be less than 1%, a sharp drop from 3.5% last year, adding: “If we are wrong it will be because we have underestimated the impact rather than overestimated.”