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The Autumn Budget 2017 has quietly given low-paid workers a pay cut

The minimum wage will not rise as fast as expected. 

For many people, the big news out of November's Budget – a massive downgrade in the outlook for productivity growth – will sound a bit abstract. The productivity downgrade has made the Chancellor’s task of balancing the books harder. But its impact on pay – with average annual earnings lowered by £1,000 – mean it’s even more daunting for families in terms of balancing household budgets. And that’s especially true for Britain’s lowest earners.

For workers on the minimum wage, the past two years have brought strong real-terms wage growth. The National Living Wage (NLW) – the higher minimum wage for those aged 25+ – has taken the wage floor from £6.50 an hour in April 2015 to £7.50 today. The Chancellor today announced it would increase next year to £7.83 – a healthy 4.4 per cent wage rise.

But ongoing weakness in overall pay is dampening the good news for those on the minimum wage. Two years ago, the NLW was expected to be £8.20 in April 2018 – 37p higher than the figure announced today.

Looking further ahead, George Osborne’s expectation of a £9 minimum wage by 2020 looks set to be delayed by two years, with the NLW only reaching that level in 2022. Incredibly, the NLW in 2020 is course to be 74p an hour lower than forecast two years ago – and that’s before you account for higher inflation eroding its value even further.

So what explains this fall? Unlike the minimum wage – which was set every year based on negotiations among representatives from employers, employees and academia on Low Pay Commission – the NLW employs a far more mechanistic approach.

The NLW is set on a trajectory to reach 60 per cent of what the typical employee aged 25+ earns an hour by 2020, with some tolerance of fewer people being in work. And that’s where Britain’s terrible productivity record comes in. Productivity isn’t the only determinant of pay growth. But it is a key one. In the OBR’s model, there’s a direct feed-through from today’s grimmer picture to pay. And if typical wages are rising more slowly than previously forecast, then so too will the NLW.

Putting those figures into pounds and pence, our analysis using today’s figures show that the pre-tax pay of a NLW earner working full-time will be over £1,400 a year lower in 2020 than originally forecast when it was announced in 2015.

Some might argue that the Chancellor should plough on with the £9 target regardless. But that would be a huge gamble considering the NLW is already a serious ratcheting up of ambition for the UK’s wage floor. So far the National Living Wage has been a huge success, dispelling a lot of the warnings about job losses that greeted its announcement. But a minimum wage can go too high and start to hurt the very people it aims to help.

For those on the NLW, the Budget’s news may be disappointing but they’re still set for a bumper few years of pay growth. And if we can finally crack our chronic productivity problem, those pay rises could get rosier still.

Conor D’Arcy is senior policy analyst at the Resolution Foundation. 

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People are not prepared to see innovation at any price - we need to take care of our digital health

Correcting the course of technology in Britain does not need to mean taking backwards steps and becoming an anti-innovation zone.

As individuals, we have never been better connected. As a society, we are being driven further apart.

Doteveryone’s People Power and Technology report, released this week, found that half of the 2,500 British people we surveyed said the internet had made life a lot better for people like them - but only 12 per cent saw a very positive impact on society.

These findings won’t be news to most people living in Brexit Britain - or to anyone who’s been involved in a spat on Twitter. The fact that we’re constantly connected to our smartphones has not necessarily improved our communities or our understanding of one other, and the trails of data we’re leaving behind are not turning into closer social bonds.

Many of the positives we experience are for ourselves as individuals.

Lots of consumer tech puts simple self-sufficiency first - one-click to buy, swipe right to date - giving us a feeling of cosy isolation and making one little phone an everywhere. This powerful individualism is a feature of all of the big platforms - and even social networks like Facebook and Twitter, that are meant bring us together, do so in the context of personalised recommendations and algorithmically ordered timelines.

We are all the centre of our own digital worlds. So it is no surprise that when we do look up from our phones, we feel concerned about the impact on society. Our research findings articulate the dilemma we face: do we do the thing that is easiest for us, or the one that is better for society?

For instance, 78 per cent of people see the Internet as helping us to communicate better, but 68 per cent also feel it makes us less likely to speak to each other face-to-face. 69per cent think the internet helps businesses to sell their products and services, while 53 per cent think it forces local shops to compete against larger companies online.

It’s often hard to see the causality in these trade-offs. At what point does my online shopping tip my high street into decline? When do I notice that I’ve joined another WhatsApp group but haven’t said hello to my neighbour?

When given clear choices, the public was clear in its response.  

We asked how they would feel if an online retailer offered free one-day delivery for lower income families, but this resulted in local shops closing down - 69 per cent found this unacceptable. Or if their bank invested more in combating fraud and cyber crime, but closed their local branch - 61 per cent said it was unacceptable. Or if their council made savings by putting services online and cut council tax as a result, but some people would find it hard to access these services - 56 per cent found it unacceptable.

It seems people are not prepared to see innovation at any price - and not at the expense of their local communities. The poorest find these trade offs least acceptable.

Correcting the course of technology in Britain does not need to mean taking backwards steps and becoming an anti-innovation zone.

A clearer regulatory environment would support positive, responsible change that supports our society, not just the ambition of a few corporations.

Some clarity about our relationship with web services would be a good start. 60 per cent of people Doteveryone spoke to believed there should be an independent body they can turn to when things go wrong online; 89 per cent would like terms and conditions to be clearer, and 47% feel they have no choice but to sign up to services, even when they have concerns.

Technology regulation is complicated and fragmentary. Ofcom and the under-resourced Information Commissioner’s Office, provide some answers,but they are not sufficient to regulate the myriad effects of social media, let alone the changes that new technologies like self-driving cars will bring. There needs to be a revolution in government, but at present as consumers and citizens we can’t advocate for that. We need a body that represents us, listens to our concern and gives us a voice.

And the British public also needs to feel empowered, so we can all make better choices - adults and children alike need different kinds of understanding and capability to navigate the digital world. It is not about being able to code: it is about being able to cope.

Public Health England exists to protect and improve the nation’s health and well-being, and reduce health inequalities. Perhaps we need a digital equivalent, to protect and improve our digital health and well-being, and reduce digital inequalities.

As a society, we should not have to continually respond and adapt to the demands of the big corporations: we should also make demands of them - and we need confidence, a voice, and representation to begin to do that.

Rachel Coldicutt is chief executive of Doteveryone.