National Living Wage Having a Limited Impact on Employment Levels

Earlier this year, we were discussing the introduction of the new National Living Wage (NWL) and its potential impact on businesses. One of the major concerns highlighted was how the imposed increase in the wage bill might affect levels of employment, particularly for small businesses where it can be more difficult to absorb the costs. The Office for Budget Responsibility predicted it would lead to 60,000 job losses by 2020.

However, the publication this month of a survey by the Resolution Foundation shows that businesses appear to be adopting higher prices, or accepting lower profits rather than seeking to cut jobs.

In the pre-BREXIT survey of 500 UK businesses, 36% said they had put up their prices to compensate for the higher wage bill and 29% said they had reduced their profits. Only 14% said they had reduced their staffing levels either by fewer hours, redundancy of slower recruitment.

Other measures businesses have taken as a result of the introduction of the NWL in April include investing more in technology and training, reducing some staff rewards and perks, scaling back plans for investment and hiring more workers under the age of 25 who are not currently affected by the new NWL and continue to be paid the National Minimum Wage.

It will be interesting to see how the longer time employment landscape shapes up as we move to leave the European Union and we will no doubt be in for a bumpy ride over the coming years. But, for now at least, it seems that UK businesses are reacting more positively to the introduction of the National Living Wage than at first feared. 

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