The introduction of the national living wage has seen businesses hike their prices, according to a new study from the Resolution Foundation, but there is limited evidence of linked job losses.
The living wage, which starts at £7.20 an hour, was introduced by George Osborne in the 2015 Budget, and came into force in April this year.
Fears had been raised that the increased costs to employers would lead to make redundancies, but in an early investigation of the changes, the think tank has found only a handful of business where this is the case.
Instead, it found the most common response has been to raise prices.
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In a survey of 500 business conducted by Ipsos Mori, the Resolution foundation found that 35 per cent of businesses said the living wage had increased their salary costs.
However, 36 per cent told the pollsters that they had responded by increasing prices, while 29 per cent had taken lower profits.
At the same time, only on in seven – 14 per cent of firms – said they had used fewer workers or offered reduced hours, while 8 per cent said they had reduced other parts of rewards, including overtime of bank holiday pay.
Resolution Foundation policy analyst Conor D'Arcy said: “Encouragingly, evidence of workers seeing their hours cut or even losing their jobs has so far been relatively limited.
“The challenge now is for firms to continue to respond positively to the National Living Wage, particularly by raising productivity.”