Living wage 'will not reach £9 per hour'

The national living wage in Britain will not hit the government's £9 ($12) an hour mark by 2020, the Resolution Foundation has warned. In July last year, the then chancellor George Osborne unveiled the new national living wage, pledging it would reach £9 by the end of the decade.

The figure, however, remains below London's hourly cost of living, which currently stands at £9.40 per hour.

It is only marginally above the £8.25 per hour that represents the true cost of living in the rest of the country.

However, in a report released on Wednesday (7 September), the think tank warned the living wage will only rise to approximately £8.70 by 2020, due to weaker wage growth.

The Resolution Foundation also urged Prime Minister Theresa May to dismiss calls from business leaders to weaken the policy, claiming doing so could leave some full-time workers up to £1,000-a-year worse off.

"Understandably some businesses are unhappy about a higher minimum wage, particularly amid the post-referendum uncertainty," said Conor D'Arcy, policy analyst at the foundation.

"But backsliding on the government commitment is unnecessary, given the in-built flexibility of the policy to adjust to changing economic circumstances. It would also be costly for millions of low-paid workers, so the Prime Minister should stick to her guns."

The pledge came as last month 16 trade associations wrote to the Business Secretary, Greg Clark, calling on the government to "exercise caution" given the current economic climate. They asked the government to ditch plans to increase the living wage to 60% of median earnings by the end of the decade in favour of smaller increases.

However, the Resolution Foundation argued that would imply increases in line to those that applied to the national minimum wage, which climbed by a mere 1.7% in the four years after the 2008 financial crisis.

Should wage increases follow a similar pattern, the national living wage would stand at just £8.17 per hour by 2020, the think tank said. That would be 55p an hour less than the latest economic forecasts indicated, translating into £1,075 a year for a full-time worker.