Will a national pay rise cost jobs?

The Organisation for Economic Co-operation and Development has urged caution over Chancellor Philip Hammond’s pledge in the Autumn Statement to increase the National Living Wage to £7.50 next April.

The National Living Wage was introduced by George Osborne in his July 2015 Budget, and came into effect this year, set at a rate of £7.20 an hour for workers aged 25 and over.

Osborne planned to increase it to £9 by 2020, so Hammond’s announcement was expected. But the OECD has warned that increasing wages across the UK as growth slows and labour markets weaken needs to be handled carefully to avoid resulting in job losses as businesses struggle to cover their costs.

These concerns echo those voiced by businesses back in the 1990s when the UK’s national minimum wage was introduced. But, it’s worth noting that those worried job losses never materialized – in fact the number of people in work has risen from 27 million in the late nineties to almost 32 million today.