Prime Minister Theresa May has said that she will not back down on the Government’s plans to increase the national living wage over the next few years.
Mrs May has dismissed calls from top business leaders to drop its 2012 target and restore the powers of the Low Pay Commission.
The minimum pay rate for over 25s increased in April by 50p to £7.20 and is set to gradually increase over the next four years to reach £9.02 by 2020. This will be the fastest wages increase in the country’s history.
Businesses want the Government to either slow down or abandon its policy to raise the national living wage, while reinstating the original powers of the Low Pay Commission (LPC). The LPC is a committee whose role is to recommend minimum wage rates each year.
Previously the LPC’s put forward annual minimum wage increases that went as high as possible, but without compromising jobs. The committee must now make sure that the rate for over 25-year-olds, reaches 60% of median earnings by 2020.
Businesses say that they are concerned about rising salary costs and believe that these plans could lead to job loses. At least 16 trade organisations have written to Greg Clark, the new business secretary, appealing to him to review the plans, particularly after the Brexit vote and the anticipated economic slowdown.
But Prime Minister Theresa May has stood firm on her commitment to what she said is to build an economy that works for everyone and hopes to boost the prospects for the poorest in the UK.
As the National Living Wage is set in relation to median wages, this should provide an allowance if there is an economic downturn.
Not everyone has been opposing the Government’s National Living Wage policy. Some supporters claim it will help to increase businesses’ disappointing rate in productivity and trade unions believe that increasing the minimum wage, will help to sustain demand at a time of economic uncertainty.
Companies embracing the National Living Wage
A report by the UK Commission for Employment and Skills has shown that some businesses in the hospitality and retail sectors, have been looking at alternative approaches to tackling National Living Wage costs that could benefit their business and employees.
For example, telecoms giant EE has been working with The Living Wage Foundation to test a ‘Good Jobs’ toolkit in its stores. They looked at increasing staff hours so the business can operate with ‘slack’, allowing time for staff training and so that customers can receive better attention. It also included training staff to improve their product knowledge, enriching jobs and looking at developing and using a wider set of skills.