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Are the Effects of Osborne’s National Living Wage being Exaggerated for Women?

The government have this week claimed that more than three million women will increase their earnings as a result of George Osborne’s National Living Wage. However, this statement disguises the fact that most working females, despite a wage increase, stand to financially lose out due to tax increases and welfare payment cuts along with the Conservatives’ other austerity measures.

Whilst is should be regarded as a positive that many women will see their wages increase, this is primarily due to the high tendency for women to be in low-wage jobs. It is estimated that more than three quarters of women in some parts of the UK currently earn under the living wage, including Wales, where more than 40 per cent of part-time female workers are below the amount.

The high concentration of women in lower paid jobs means that they will receive 61 per cent of the benefits of the minimum wage rise for the over-25s, which was a pivotal piece of legislation in Osborne’s budget. In a move to position his party as a friend rather than foe to the less affluent in society, Osborne announced that the national living wage will rise to £6.70 in October and £7.20 in April, expected to increase to £9.35 an hour by 2020.

“Whilst is should be regarded as a positive that many women will see their wages increase, this is primarily due to the high tendency for women to be in low-wage jobs.”

The think tank, Resolution Foundation, has calculated that by 2020, 3.7 million women are likely to have seen their wages rise as a result of the policy; that is 29 per cent of all female workers. As a result, the gender pay gap is likely to begin narrowing more rapidly than expected over the years ahead.

However, both the positive effects on women’s pay and the gender pay gap should be seen as modest. As Sam Smethers, Chief Executive of gender equality charity, The Fawcett Society, argued: “It is good to see that so many women will benefit from an increase in the national living wage, but that is only because so many of them are in low-paid work in the first place. It is a stark reminder of the segregation that still exists between men and women in the workforce, with men concentrated at the top and women at the bottom.”

In addition, Resolution Foundation has conducted analysis proving that as more women work part time, their average cash gain will be lower, with a predicted average £690 a year against £860 for men.

“The gender pay gap is likely to begin narrowing more rapidly than expected over the years ahead.”

The benefits will also vary regionally, with 28 per cent of men and 27 per cent of women in Yorkshire and the Midlands respectively receiving a pay rise, as opposed to just 14 per cent in the South East. 41 per cent of women receiving a payrise will be part-time workers, limiting the extent of their financial benefit. 25-30 year olds and 66+ year-old women will be the biggest beneficiaries.

Furthermore, the income boost that many workers will receive from the minimum wage rise will be offset by the cuts to tax credits and other benefits that were also announced in the July budget, particularly for lower-income households. Analysis by the Resolution Foundation has suggested that no women will receive more than a 1 per cent change in income, with only the richer end of the spectrum seeing any financial benefit at all.

John Cridland, Director-General of the Confederation of British Industry, has warned the government that businesses would struggle to cope with higher wage costs, making job cuts inevitable. He warns that 60,000 part-time jobs would be dissolved, affecting women the most, and reducing the positive impact of the government’s introduction of new jobs.

“Analysis by the Resolution Foundation has suggested that no women will receive more than a 1 per cent change in income, with only the richer end of the spectrum seeing any financial benefit at all.”

Whilst it is welcome that some low-wage workers, including many women, are going to see a pay rise as part of the minimum wage supplement, it is very likely that many of those people will also be seeing substantial cuts to their household incomes as a result of welfare cuts. A study by Unison found that the average wage gain of £1,210 would in the majority of cases be cancelled out by the government’s austerity measures. Many of the lower paid workers, the majority of whom are women, will be left poorer overall due to steep cuts to their tax credits.

Welfare payments are to be cut by 12 billion, and taxes will be increased by 6.5 billion a year from 2016. The new mandatory national living wage will rarely increase incomes. Unison have estimated that a family with two children and two adults, both working 35 hours a week on the national minimum wage, would lose £1, 615 a year under the Conservatives measures.

It should be remembered that the living wage was created to provide workers with a basic standard of living, especially with more women in the workplace than ever before. Sadly this will not be achieved in most cases due to the government’s tax credits cuts. Thus, the positive effects of the pay rise for women are more superficial than Osborne suggests.

Sophie Morris

Image: Petras Gagilas via Flickr

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