Next month’s planned increase in the national living wage should be delayed to prevent struggling businesses from laying off workers during the Covid-19 crisis, the Institute for Fiscal Studies (IFS) has said. The thinktank said the above-inflation increase from £8.21 to £8.72 an hour threatened jobs and ran counter to the policies announced by the chancellor, Rishi Sunak, to keep people in work. It said the rate may even need to be cut for the duration of the emergency. In a briefing note, the IFS said the Low Pay Commission had recommended the 5% real-terms rise last October, long before the pandemic. It said it was “extremely hard to believe” that the commission would have recommended the rate had it known of the coming crisis. Tom Waters, an IFS researcher, said: “Given these circumstances, the government might do well to postpone the upcoming rise until the crisis has ended. They should ask the LPC for advice on whether there might even be a case for a temporary cut in minimum wages – mirroring the temporary increase in wages.” Sunak announced last week that the government would pay 80% of the wages of workers furloughed by their employers for three months. He also announced increases in universal credit, housing benefit and working tax credits. There has been no suggestion from the government that it intends to abandon plans to increase the national living wage next month – a commitment that featured prominently in the Conservative party’s election campaign last autumn. The IFS said this was a natural time to have a more generous system as the government sought to shield families from deprivation caused by job losses and inability to work. Since 2015, ministers have justified a much less generous welfare system on the grounds that the national living wage has been rising at a time when jobs have been plentiful. The thinktank said the aim now was to avoid a “massive” fall in employment. Waters said: “While there is a clear rationale for benefit increases in the current environment, it’s much harder to see a justification for NLW rises, which could undercut the government’s other policies aimed at keeping businesses afloat and avoiding massive job losses. The government should seriously consider a delay to the NLW increase, mirroring the temporary rise in benefits.” Waters said minimum-wage workers would lose out if they continued to be employed through the crisis, but added that those in poorer households would in almost all circumstances be compensated by higher benefits and the forthcoming increase in the point at which employees start paying national insurance contributions.