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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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Jeremy Corbyn supporters should stop excusing Labour’s anti-immigration drift

The Labour leader is a passionate defender of migrants’ rights – Brexit shouldn’t distract the new left movement from that.

Something strange is happening on the British left – a kind of deliberate collective amnesia. During the EU referendum, the overwhelming majority of the left backed Remain.

Contrary to a common myth, both Jeremy Corbyn and the movement behind him put their weight into a campaign that argued forcefully for internationalism, migrants’ rights and regulatory protections.

And yet now, as Labour’s policy on Brexit hardens, swathes of the left appear to be embracing Lexit, and a set of arguments which they would have laughed off stage barely a year ago.

The example of free movement is glaring and obvious, but worth rehashing. When Labour went into the 2017 general election promising to end free movement with the EU, it did so with a wider election campaign whose tone was more pro-migrant than any before it.

Nonetheless, the policy itself, along with restricting migrants’ access to public funds, stood in a long tradition of Labour triangulating to the right on immigration for electorally calculated reasons. When Ed Miliband promised “tough controls on immigration”, the left rightly attacked him.  

The result of this contradiction is that those on the left who want to agree unequivocally with the leadership must find left-wing reasons for doing so. And so, activists who have spent years declaring their solidarity with migrants and calling for a borderless world can now be found contemplating ways for the biggest expansion of border controls in recent British history – which is what the end of free movement would mean – to seem progressive, or like an opportunity.

The idea that giving ground to migrant-bashing narratives or being harsher on Poles might make life easier for non-EU migrants was rightly dismissed by most left-wing activists during the referendum.

Now, some are going quiet or altering course.

On the Single Market, too, neo-Lexit is making a comeback. Having argued passionately in favour of membership, both the Labour leadership and a wider layer of its supporters now argue – to some extent or another – that only by leaving the Single Market could Labour implement a manifesto.

This is simply wrong: there is very little in Labour’s manifesto that does not have an already-existing precedent in continental Europe. In fact, the levers of the EU are a key tool for clamping down on the power of big capital.

In recent speeches, Corbyn has spoken about the Posted Workers’ Directive – but this accounts for about 0.17 per cent of the workforce, and is about to be radically reformed by the European Parliament.

The dangers of this position are serious. If Labour’s leadership takes the path of least resistance on immigration policy and international integration, and its support base rationalises these compromises uncritically, then the logic of the Brexit vote – its borders, its affirmation of anti-migrant narratives, its rising nationalist sentiment – will be mainlined into Labour Party policy.

Socialism in One Country and a return to the nation state cannot work for the left, but they are being championed by the neo-Lexiteers. In one widely shared blogpost on Novara Media, one commentator even goes as far as alluding to Britain’s Road to Socialism – the official programme of the orthodox Communist Party.

The muted and supportive reaction of Labour’s left to the leadership’s compromises on migration and Brexit owes much to the inept positioning of the Labour right. Centrists may gain personal profile and factional capital when the weaponising the issue, but the consequences have been dire.

Around 80 per cent of Labour members still want a second referendum, and making himself the “stop Brexit” candidate could in a parallel universe have been Owen Smith’s path to victory in the second leadership election.

But it meant that in the summer of 2016, when the mass base of Corbynism hardened its factional resolve, it did so under siege not just from rebelling MPs, but from the “Remoaners” as well.

At every juncture, the strategy of the centrist Labour and media establishment has made Brexit more likely. Every time a veteran of the New Labour era – many of whom have appalling records on, for instance, migrants’ rights – tells Labour members to fight Brexit, party members run a mile.

If Tony Blair’s messiah complex was accurate, he would have saved us all a long time ago – by shutting up and going away. The atmosphere of subterfuge and siege from MPs and the liberal press has, by necessity, created a culture of loyalty and intellectual conformity on the left.

But with its position in the party unassailable, and a radical Labour government within touching distance of Downing Street, the last thing the Labour leadership now needs is a wave of Corbynite loyalty-hipsters hailing its every word.

As the history of every attempt to form a radical government shows, what we desperately need is a movement with its own internal democratic life, and an activist army that can push its leaders as well as deliver leaflets for them.

Lexit is no more possible now than it was during the EU referendum, and the support base of the Labour left and the wider party is overwhelmingly in favour of free movement and EU membership.

Jeremy Corbyn, John McDonnell and Diane Abbott are passionate, principled advocates for migrants’ rights and internationalism. By showing leadership, Labour can once again change what is electorally possible.