Living wage hike could lead to 4,000 job losses in Northern Ireland, warns PwC economist
Up to 4,000 jobs in Northern Ireland could be lost within the next four years after a new £7.20 per hour national living wage (NLW) is introduced today, an economist has said.
The increase of 50p per hour up to £7.20 for all employees aged 25 and over, which was announced by Chancellor George Osborne last year and applies from today, is expected to benefit around 80,000 low-paid workers here.
But PwC chief economist Dr Esmond Birnie said that as the price of labour increases to employers, losses are likely to come about due to job cuts, failure to recruit and greater automation.
He said that the region will be harder hit by job losses than the rest of the UK. "Crucially, the Osborne plan is to increase the NLW to 60% of the level of median UK wages for those aged 25 and over by 2020," he said.
"That implies the NLW will be a higher per cent of the median here in Northern Ireland. By implication, the employment reduction in Northern Ireland could be higher than a simple pro rata estimation. A range of 2,000 to 4,000 job losses by 2020, for example, is plausible."
Belfast publican and licensing consultant Michael Stewart said that while he believed the increase was good news for workers, it was likely to be passed on to customers in higher prices.
Economist Paul MacFlynn, from the Nevin Economic Research Institute, said he believes around 13% of local employees will benefit from the automatic 7% wage increase and the accommodation and food sector and the retail sector will account for the majority of the wages increase.
The increase is likely to be welcomed by many employees, but some trade unions believe that the rise is not high enough, while employers reiterate that the increase is likely to have to be passed on to customers.
Regional organiser Laura Graham, from Bakers, Food and Allied Workers Unions, fears that employers may try to make up for the increase by changing employee terms and conditions, such as overtime pay and holiday entitlement for its 800 members.
"This is a small step only and we would rather have our members paid the living wage of £8.20 an hour and have been campaigning for £10 an hour," she said.
However, Hospitality Ulster chief executive, Colin Neill, said: "We want to see our staff earn more, but by forcing a new national living wage upon the sector at this time will have an unintended consequence as employers will have to potentially cut staff and try to allocate an already stretched income even further," he said.
NI Independent Retail Trade Association chief executive, Glyn Roberts, added that many small traders would struggle to cope with the increase.
"Small traders are facing a perfect storm of business costs with the rates revaluation, the NLW and auto-enrolment pensions," he said.
"Our members will be facing a nearly 50% increase in their wages bills as a result of the living wage and auto-enrolment, not to mention many of them paying up to 100% extra in their rates bill."
IKEA has introduced £8.25 per house nationwide for staff of all ages - the rate suggested by lobby group Living Wage Foundation - while Lidl has already recently agreed to pay a £8.20 rate to Northern Ireland employees.