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The NI increase may even kickstart companies moving people from more secure salaries into the gig economy, so I hope Labour are still pushing the merger between employee and worker status to make sure this doesn't happen.
I'm not a pal of Neuvo New Labour (and my feeling is generally they were nowhere near brave enough with this budget) but this is conjecture. Despite vocal whining from the Director class, it's clear businesses can and should swallow this hike. The very rational being would simply point out that in recent years businesses have generally been able to grow profits or engage in pretty brazen profiteering (margins rose 30% avg post-pandemic) all whilst wages stagnated.
Pan-sector wage depression directly related to this rate change is unlikely, and though there will be sharks that use this as an excuse to try minimise wage and try and move employees to less formal engagements in the micro, wage dynamics are generally more complex and robust than that.
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my feeling is generally they were nowhere near brave enough with this budget
it's clear businesses can and should swallow this hike
businesses have generally been able to grow profits or engage in pretty brazen profiteering
I agree with all of that, I'm just framing it as a risk, which you seem to agree with at least on the micro scale. Personally, I can't see a force stopping companies passing this through to wages or reductions in employment security to at least some extent, maybe over time as they deal with staff turnover or new hires. The risk of not sorting this out in the employment rights bill is pretty large.
I'm not sure a faith in labour market dynamics is going to save anyone here either. After all, the last time we had a tight labour market (i.e. good for wages), the macroeconomic response was to increase interest rates to trigger a reduction in wage growth.
slippers
Not read the RF report, but there's also the underlying reality of rising housing costs in addition to stagnating wages over the next decade — see modelling from the JRF here: https://x.com/alfie_stirling/status/1851686979693425131
I'd imagine they're hanging their hat on the minimum wage increase, planning reform, and the upcoming employment rights bill to take up some of the slack. Honestly though, the employer national insurance increase was just a bad idea — it'll likely put downward pressure on wages in the long term, since it's a tax on turnover rather than profit.
The NI increase may even kickstart companies moving people from more secure salaries into the gig economy, so I hope Labour are still pushing the merger between employee and worker status to make sure this doesn't happen.
Without doubt, sadly.