On the day that the National Living Wage comes into effect, The British Chambers of Commerce calls on the government to act cautiously as it increases the wage – or risk business investment, productivity, and growth.
Given that companies face a number of up-front costs, there is a risk that some firms could be forced to divert money away from investment in skills and infrastructure, which could hurt the UK’s productive potential.
Dr Adam Marshall, Acting Director General of the BCC, said:
“As a member of the Living Wage Commission, I saw first-hand how a decent wage can transform people’s lives, as well as their performance at work. So we should celebrate every business that can, and does, make the commitment to pay each and every employee a living wage. That includes a significant majority of Chamber of Commerce members all across the UK.
“However, the government’s new National Living Wage will apply a ratchet effect to all companies’ pay bills, and sits alongside a raft of other high employment-related costs. It is unclear whether the NLW will spur productivity or strengthen businesses, communities or the economy as a whole. 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.
“In the face of these concerns, the government must make a clear commitment to avoid over-burdening firms when it comes to future increases in the National Living Wage. Future increases must be proportionate, take account of other employment-related costs, and be based on clear and unequivocal evidence.
“Low pay and low social mobility are real problems in Britain today, but they won’t be solved just by driving up wage rates. The best way to get a high-pay Britain is through better education, training, and investment, by schools, universities and businesses alike.”