Majority of employers support living wage increase, report finds

But some businesses say they would need government support to manage the rise in costs, including help investing in skills and training

The majority of employers support an increase in the statutory minimum wage – as long as it is accompanied by additional support for skills investment, a survey has found.

The poll of more than 1,000 businesses by the Learning and Work Institute and the Carnegie UK Trust – conducted at the start of the coronavirus outbreak – found 54 per cent supported the government’s policy of increasing the national living wage (NLW) to two-thirds of the median income by 2024, which is currently estimated to be £10.50 an hour. Just 9 per cent opposed the move.

The report – The Future of the Minimum Wage: the Employer Perspective – found the majority of employers did not think the increase would have a negative impact on either their business or UK employment more broadly, with 54 per cent saying a higher minimum wage could help boost UK productivity.

Currently the living wage – the statutory minimum wage for those over the age of 25 – is £8.72 an hour. The national minimum wage for those aged between 21 and 24 is £8.20 an hour, dropping to £6.45 for those aged 18 to 20, and £4.55 for those under the age of 18.

Gerwyn Davies, public policy adviser at the CIPD, said it was particularly important to listen to the views of the low-paid sectors, including hospitality and retail, given they are likely to be disproportionately affected by any minimum wage increase: “The report is right to say that the NLW has had a modest negative impact on employment levels to date overall, although there have been some job losses in some low-wage sectors.”

Davies also cautioned about linking minimum wage increases to higher productivity: “Some employers from affected sectors are reporting to us that the latest [national living wage] increases have led to cuts in skills investment and had a negative impact on career progression.”

Get more HR and employment law news like this delivered straight to your inbox every day – sign up to People Management’s PM Daily newsletter

“We also know that work intensification has been the main productivity response to recent rises, which is not sustainable, especially in the current climate,” Davies said, adding that it would be sensible for the Low Pay Commission (LPC), which advises the government on the statutory minimum wage, to increase the minimum wage in line with inflation “to help ease the wage bill pressure on struggling sectors”.

“If ever there was a time for the LPC to apply the emergency brake, it is now,” he said.

Douglas White, head of advocacy at the Carnegie UK Trust, said it was encouraging that the majority of employers supported a higher minimum wage: “Even before the onset of the pandemic, there were too many workers struggling on low pay.

“The economic challenges caused by Covid-19 mean it is even more important that future decisions around the minimum wage are ambitious in delivering better pay for low-paid workers, while recognising the real challenges that many businesses are experiencing and providing them with essential support,” said White.

The report also found that half (50 per cent) of businesses felt they would not need to make any changes in response to the additional cost of a higher minimum wage.

A fifth (22 per cent) said they would pass the cost on to consumers; 15 per cent would hire fewer members of staff; and 10 per cent would increase the use of temporary or flexible contracts with the same proportion saying they would reduce staff benefits.

However, the majority of employers said government support would be necessary to help manage an increase in the minimum wage. More than a third (37 per cent) of employers said they would welcome help investing in skills and training, while a third (33 per cent) said they would like to see any living wage increase to be accompanied by a temporary reduction in national insurance contributions.