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Caution advised over National Living Wage roll out

28 November 2016

Advice on implementation of the National Living Wage has been given to the UK by the Organisation for Economic Co-operation and Development (OECD).

It said that this should be handled cautiously due to the possible impact it could have on employment levels.

Currently set at £7.20 an hour, this will rise to £7.50 an hour next April, following Chancellor Philip Hammond's Autumn Statement announcement last week.

However, the OECD described the UK labour market as "resilient", although the rate of creation of new jobs had decreased in recent months.

Although wage increases had combined with low inflation to positive effect, the OECD said the reduction in the pound's exchange rate is increasing price pressure.

Therefore, it advised that caution is required to raise National Living Wage levels to 60% of median hourly earnings by 2020.

This should involve careful assessment of the effects on employment numbers before further increases are implemented, particularly in the event of slow growth and weakening labour markets.

The OECD further stated that low global economic growth over the last five years could be improved by effective government spending and tax policies.

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