Leading business groups are cautioning against “artificially increasing pay” today, as the Low Pay Commission closes its public consultation on the minimum wage.
The Low Pay Commission – an independent body set up to advise the government on the national minimum wage – opened the public consultation last month, as part of a larger probe into UK pay rates.
The consultation followed chancellor George Osborne’s announcement in the Summer Budget of a new minimum wage for over-25s which he dubbed the National Living Wage (NLW).
The NLW is set to go into effect next April at £7.20 per hour and is expected to increase incrementally to £9 per hour by 2020. The national minimum wage for workers aged 21 and over is currently £6.50 per hour.
The Institute of Directors (IoD) said it has “cautiously welcomed” the NLW, but called for care to be taken over future minimum wage rises.
Seamus Nevin, head of employment and skills policy at the IoD, said: “IoD members already recognise the benefits of letting their staff share in their success.
Nine out of 10 pay the full living wage, as set by the Living Wage Foundation, so they will mostly be able to accept the chancellor’s bargain.”
The Living Wage Foundation, separate to the Low Pay Commission, recommends a minimum wage of £7.80 an hour, with a rate of £9.15 per hour for London staff.
Nevin added: “Nevertheless, government cannot ignore the potential jobs cost, especially in the hospitality, retail and care sectors. The minimum wage must not become a political competition to see which party can offer the most, irrespective of what the economy and employers can afford.”
CBI director general John Cridland made a similar point, noting: “While business wants to see people earning higher wages and benefit from rising living standards, they must be driven by improvements in productivity.
Artificially increasing pay is a gamble that will hurt smaller businesses, as well as those operating in care, retail, hospitality and food manufacturing.”
Cridland reasserted the role of the Low Pay Commission – which Osborne snubbed in his NLW decision – saying the Commission must “retain its independence and assume responsibility for determining future increases in the National Living Wage.”
WHAT IS THE NATIONAL LIVING WAGE (NLW)?
Q: Chancellor George Osborne pulled a rabbit out of the Treasury hat when he announced a new so-called National Living Wage (NLW) at the emergency Summer Budget in July. But what is the NLW? And how does it compare to the Living Wage movement’s recommended rates?
A: The NLW is closely associated with the Living Wage Foundation, a campaign group that has pushed to set an hourly rate, calculated according to the basic cost of living in the UK and exceeding the current minimum wage of £6.50.
The group estimates the current NLW is £7.85 an hour, and the current London living wage – based on the cost of living in the capital – is £9.15 an hour.
Osborne’s proposals appear loosely based on starting the NLW at £7.20 an hour from next April, gradually increasing it to £9 an hour by 2020.