Anecdotally, small business owners have been divided for some time about the potential implications of the introduction of the new Living Wage. But new research published by the Federation of Small Businesses suggests concern among small business owners, with many suggesting it might delay job creation and could even cause some job losses.
In his last Budget, the Chancellor not only announced a new minimum wage of £7.20 per hour from next April, but also the introduction of a compulsory national living wage for over-25s. The living wage is currently £7.85 an hour, and £9.15 in London, though it will rise to £9.00 an hour for those outside London by 2020.
Research from the Federation of Small Businesses has revealed that more than a third (38%) of small businesses surveyed expect the National Living Wage to negatively impact their business. That figure rises to 54% when asked to consider the £9 National Living Wage from 2020. Only 6% of small businesses regarded it as a benefit.
The FSB estimates that a small retailer with six full-time staff over the age of 25 currently earning the National Minimum Wage will have £5,900 a year added to its wage bill. Businesses in the wholesale and retail sector, and those working in accommodation and food services, are most likely to say the National Living Wage will have a negative impact.
John Allan, FSB National Chairman, was quoted as saying: “The UK economy has been performing well, but we should not allow this to make us complacent. Businesses worked hard to weather the financial crisis, keeping on staff despite pressure to cut headcounts. Now times are better we know members are beginning to raise wages and take on new staff.
“Over half of our members already pay their staff above the voluntary Living Wage, but those that don’t are often operating in highly competitive sectors with very tight margins. In many of these industries, the only sustainable way to deliver real long-term wage growth is to improve productivity. Without improved productivity there is a real risk that higher enforced statutory wages will lead to fewer jobs being created, fewer hours for existing staff and, unfortunately in some cases, to job losses.”
This could be the definitive Catch 22 problem. No small business owner would really take issue with the objective behind the National Living Wage – to ensure where people can earn a salary that enables them to not merely survive but also thrive when they are in work. However, the businesses that employ them – or which aspire to employ them – can only do so if they themselves are viable. It may be that the Government needs to look at giving small and microbusinesses, particularly those in London, some latitude on the introduction of the Living Wage, as opposed to the Minimum Wage, if they want the businesses to become sustainable job creators.