Member Article

The impact of Brexit: Country's lowest paid workers 'will see wages fall by almost £800'

The economic and social implications of this year’s European Union (EU) referendum have dominated the headlines since June, and with the recent announcement from Prime Minister Theresa May that Article 50 would be triggered by April 2017, the impact of Brexit will continue to be a highly debated topic in the coming months. While much of the focus has been on how Brexit will impact big businesses and the immediate effects on the value of the pound, there has been limited coverage on how the changes will translate to the everyday lives of working people.

According to a new study from the Resolution Foundation think tank, the country’s lowest paid workers could see an almost £800 reduction in their annual wages by the end of the decade. In particular, the way in which the minimum wage is set looks increasingly likely to be changed, leaving the UK’s lowest earners facing further financial uncertainty.

News of the potential wage drop comes after Treasury documents showed that the country could lose up to £66 billion a year if it pursues the ‘hard Brexit’ option, which would see Britain both leaving the single market and wavering EU restrictions on legislation and freedom of movement. In addition, Theresa May’s speech at last week’s Conservative conference, which signalled the UK will focus more on immigration than single market access in Brexit, sent the pound tumbling to its lowest ever value against the euro.

Although the longer-term effects of leaving the EU are yet to present themselves, the Resolution Foundation survey results suggest that the lowest paid individuals could be among the hardest hit by the changes. April 2016 saw the government introduce the new £7.20 per hour National Living Wage (NLW), which was brought in to replace the minimum wage for workers over the age of 25. Now based on median earnings, the NLW rate was expected to reach £7.60 per hour in 2017, according to the Office for Budget Responsibility (OBR).

The new rate is set to be discussed by Chancellor Philip Hammond in next month’s Autumn Statement; however, the Resolution Foundation report predicts it will be 10 pence lower than the OBR predicted due to weaker wage growth. If its prediction is correct, it could mean the lowest paid workers will be £200 worse off by 2017. By 2020, the think tank suggests that further slow wage growth could mean the living wage may only reach £8.60 an hour, instead of the government’s £9 promise, representing a £780 drop in annual wages.

While the true impact of Brexit is yet to be seen, the predictions from the Resolution Foundation study show that leaving the EU will more than likely affect the lives of everyday people. Many people voted to leave the EU because they thought membership money would be reinvested in our economy, to help the NHS and improve the lives of everyday, hard-working people. However, looking solely at the impact of wages it seems that these are the very individuals whose lives will become more difficult as a result of leaving the bloc. While the immediate impact could be short term, it is nonetheless worrying to hear these predictions, which will affect the lives of millions of people across the UK.

This was posted in Bdaily's Members' News section by Sellick Partnership .