New minimum wage ‘must be matched by productivity growth’

A new, mandatory 'national living wage' came into force in the UK on Friday, 1 April 2016, which is expected to result in immediate pay rises for 1.3 million workers aged 25 and over.

restaurant staff minimum wage
The new, £7.20 an hour minimum – 50p an hour higher than the current minimum wage – would add substantially to employers' costs, business organisations warned, especially in labour-intensive sectors, such as social care.According to the independent Office for Budget Responsibility the new minimum could result in the loss of 60,0000 jobs. But Sir George Bain, former chairman of the Low Pay Commission, has rejected such fears."I think the claims are overblown, but I think it is too complicated to call in advance," he told BBC Radio 4's Today programme.Further rises are on the way with the government pledging to increase the rate to £9 an hour by 2020, which would raise the pay of an estimated nine million workers.Dr Adam Marshall, acting director general of the British Chambers of Commerce, said, "The government's new living wage will apply a ratchet effect to all companies' pay bills, and sits alongside a raft of other high employment-related costs."While many companies have the ability to increase pay, others will struggle to do so alongside pensions auto-enrolment, the apprenticeship levy, employer National Insurance contributions and other up-front costs."Some will have to divert money from training and investment to increase pay, which could hurt their productivity. Others may stop hiring altogether."Josh Hardie, deputy director general of the Confederation of British Industry, said, "Companies are committed to raising prosperity and living standards, but for wage increases to be sustainable they must go hand-in-hand with productivity growth."If the living wage doesn't get this balance right it will risk being unaffordable for many firms. Smaller businesses and those in key sectors like hospitality, retail and care are likely to be particularly affected."Frances O'Grady, general secretary of the Trades Union Congress, said, "Britain desperately needs a pay rise, and this increase is good news for those aged 25 or older. But the government must ensure that younger workers are not left behind: 21 to 24-year-olds will not be seeing an increase. This is not fair. Future wage increases must narrow the pay gap between old and young."The Living Wage Foundation  said that its own proposed level of pay – £8.25 an hour and £9.40 in London – was considerably higher than the new minimum."The job is not done when it comes to tackling low pay," said Katherine Chapman, the foundation's director. "Businesses who can afford to pay a rate that reflects the real cost of living should do so and join over 2,300 employers signed up to pay our higher, voluntary living wage."For profitable business or those who see themselves as innovators and leaders, simply not breaking the law on pay is not enough. Many businesses want to aim higher."Paul Johnson, director of the Institute for Fiscal Studies, told BBC Radio 5 live, "This is going to have, in the longer run, a huge effect on the British labour market, because it's going to affect such a large fraction of workers."

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