Hike in hourly rate could push more workers into cheaper and less secure forms of employment
New research, released today by the Social Market Foundation (SMF) think tank, warns that two million self-employed workers would be paid less than the £10 minimum wage hourly rate that Labour says it will introduce by 2020.
SMF research last year highlighted concerns that the introduction of the National Living Wage (NLW) could provide an “added incentive” for employers to contract out work to self-employed workers instead of employing them as full staff members.
The updated research raises questions about whether a sudden increase in the minimum wage could encourage more employers to make that switch.
James Kirkup, director of the Social Market Foundation, said:
“Finding sensible, sustainable ways to increase the earnings of people on low wages is economically and socially vital, but there is a real risk that politicians who think that the Government can simply order wages to rise might end up doing more harm than good.
“A sharp increase in the headline minimum wage without a sensible reassessment of the nature of employment and self-employment could actually end up pushing more low-paid workers out of full employment and into cheaper and less secure forms of work.”
The SMF is currently looking at the divide between how self-employed and employed workers are treated by the tax and benefits systems and will be publishing research on it in the next few weeks.
Self-employment is a growing part of the employment landscape. It now accounts for over 1 in 7 of workers in the UK, a proportion that has grown by a quarter since 2000.
OBR March 2017 forecast rates: £7.50 (current rate); £7.90 (2018); £8.30 (2019); £8.75 (2020)
Proposed: £10.00 (2020)
Data used in the research
National-level data is based on the Family Resources Survey (FRS 2014/15), which is one of the few national-level surveys that asks respondents about income from self-employment. Estimates are derived by forecasting future hourly wages in line with the new (March 2017) OBR projections of average earnings until 2020. The figures presume a one-off increase in NLW for workers aged over 25 from £8.30 in 2019 (current OBR estimate) to £10.00 in 2020. The OBR forecasts can be found at http://budgetresponsibility.org.uk/faq/where-can-i-find-your-latest-forecasts/
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Notes to editors
Data used in the research
National-level data is based on the Family Resources Survey (FRS 2014/15), which is one of the few national-level surveys that asks respondents about income from self-employment. Estimates are derived by forecasting future hourly wages in line with the new (March 2017) OBR projections of average earnings until 2020. The figures presume a one-off increase in NLW for workers aged over 25 from £8.30 in 2019 (current OBR estimate) to £10.00 in 2020.
Today’s updated research draws on work the SMF published in March 2016 with Trust for London, which can be seen here. The press release for that work can be read here.
About the Social Market Foundation
The Social Market Foundation (SMF) is a non-partisan think tank. We believe that fair markets, complemented by open public services, increase prosperity and help people to live well. We conduct research and run events looking at a wide range of economic and social policy areas, focusing on economic prosperity, public services and consumer markets. We engage with policymakers and opinion formers, including Ministers, MPs, civil servants, regulators, businesses, charities and the media. The SMF is resolutely independent, and the range of backgrounds and opinions among our staff, trustees and advisory board reflects this.
Media enquiries
Please contact David Mills, SMF communications director, david@smf.co.uk / 020 7222 7060
