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30.08.16

Risk of ‘crunch point’ in encouraging national living wage increase

The national living wage has led to an increase in pay for social care workers so far, but may not be sustainable in the long term, according to the Resolution Foundation.

The national living wage, which increases minimum pay for workers aged over 25 to £7.20 an hour, was introduced in April.

The Resolution Foundation report said that in its first three months, the national living wage has led to a pay increase of 9.2% for social care workers, over one third higher than the legal minimum. It attributed this to a ‘spillover effect’.

It also found that 83% of workers aged 24 and under have seen their hourly pay increase to the national living wage or above, despite this not being a legal requirement.

The increased wage had not led to a cut in hours, with average hours for social care workers previously below the national living wage rising by 1.1%, compared to 0.5% for higher paid workers.

Laura Gardiner, senior research and policy analyst at the Resolution Foundation, said: “It is great news that the national living wage has had a large positive impact on pay in social care, giving hundreds of thousands of frontline care workers a pay rise, with no evidence of hours being cut to foot the bill.”

The introduction of the national living wage led to fears that it will make the funding crisis for social care worse.

But the Resolution Foundation warned that the benefits of the increase may not last in the long term, as the increased cost is set to reach £2.3bn by 2020.

The research also showed that one-third of workers are receiving the national living wage, compared to the one-quarter who earned the national minimum age. This raises concerns that it will make it harder for workers to progress, and also increases the risk of non-compliance when time not covered by contracted pay rates but legally covered by minimum wages is accounted for.

Gardiner said: “As the national living wage continues to rise to its target value by 2020 we risk reaching a ‘crunch point’ where a lack of funding leaves the care sector unable to continue to spread the benefits of the national living wage.”

She said that the government must provide more funding in order to help attract and retain the workforce, especially if migration levels fall following the UK’s vote to leave the EU.

The Resolution Foundation has previously said that the national living wage must be accompanied by increased investment in productivity and training.

The Department of Health is due to complete a review of the impact of the national living wage on the social care sector by November.

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