National Living Wage has not led to job losses, survey says

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Shop workers are among those expected to benefit from the National Living Wage

Employers have responded to the new National Living Wage (NLW) by raising prices or reducing profits rather than cutting jobs, according to a survey from the Resolution Foundation.

The wage, which requires employers to pay staff aged 25 and over at least £7.20 an hour, was introduced in April.

This report is the first snapshot of how firms have reacted to the NLW.

It comes after the Office for Budget Responsibility predicted it would lead to 60,000 job losses by 2020.

Impact of Brexit

Five hundred companies, covering a range of UK businesses, were questioned just before the referendum on Britain’s membership of the European Union, of which 215 said that the new NLW had impacted their wage bill.

Some 36% of those affected by the NLW said they had put up their prices to compensate for the higher wage cost, while 29% said they had reduced their profits.

Despite reports of some employers cutting back on staff terms and conditions, the survey found that only 8% had cut paid breaks, overtime or bank holiday pay.

Separately, the not-for-profit Resolution Foundation think tank warned the UK’s decision to leave the EU could affect the government’s new wage policy.

It said the so-called Brexit would be likely to reshape the landscape in which many low pay sectors operate, creating huge uncertainty about the outlook for earnings over the coming years.

Weaker wage growth, it said, could reduce the current projected real terms value of the NLW by up to 40 pence an hour by 2020.

The policy was announced in last summer’s Budget by Chancellor George Osborne, in what he said was a move to create a higher-wage, lower-welfare economy.

Workers aged 21 to 24 continue to be paid the National Minimum Wage of £6.70 an hour.

The DIY chain B&Q, supermarket Tesco, coffee chain Caffe Nero and the John Lewis Partnership have all this year reduced some staff payments or perks, but most have said the moves were unrelated to the 50p-an-hour increase in the National Living Wage (NLW).

A spokesman for the Department for Business said: “The government wants to move to a higher wage, lower tax and lower welfare society and the National Living Wage is a crucial part of achieving this. It is encouraging to hear that employers are investing in training and technology which will help to improve productivity.

“We recognise that employers are responding to the NLW in a variety of ways depending on their circumstances. The Low Pay Commission will recommend the level of the NLW going forward to make sure that wages rise to reward workers while considering the impact on the economy.”

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