Trade associations have written to the new Secretary of State for Business, Energy and Industrial Strategy (BEIS) Greg Clark, urging caution over the government’s policy to raise the national living wage significantly by 2020
The letter, written by 18 trade associations, calls for the Low Pay Commission (LPC) to be given back its original power to objectively assess the impact of wage rates on businesses.
The trade associations also raise concerns that the expectation to increase the national living wage to £9.02 by 2020, resulting in one of the highest rates in the developed world, could cause widespread job losses and damage prospects.
It has been suggested that the government should abandon its target if the economy worsens.
A spokesperson for BEIS said: ‘The government is committed to building an economy that works for all and ensuring that the national living wage works for employees as well as businesses of all sizes, and will continue to back small firms to grow and create jobs by providing an environment in which they can thrive.
‘The Low Pay Commission plays a critical role in providing recommendations for national minimum wage rates, and now has additional responsibilities to help deliver the national living wage. The government has asked the Low Pay Commission to recommend increases to the national living wage towards 60% of median earnings by 2020, subject to sustained economic growth.’
The letter also called on the Greg Clark to create a new steering group to allow businesses to talk to government about the impact of the living wage. It was signed by associations such as: Federation of Small Businesses, National Federation of Retail Newsagents, British Beer and Pub Association and others.
The rise in national living wage, along with the new apprenticeship levy that is set to launch in 2017, would add to the high input costs that businesses face.
The apprenticeship levy announced at the Autumn Statement will cost public sector employers around £700m. The levy of 0.5% on company payrolls of over £3m is designed to raise £3bn a year and fund three million apprenticeships by 2020.
Raising the national living wage does not mean that all businesses will necessarily pay their employees this wage. Despite company bosses receiving 10% pay rises, raising the average salary to £5.5m, only a quarter of FTSE 100 firms pay the national living wage leading to a growing gap in wages.
