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National living wage will affect quarter of firms, say researchers

Published 15/02/2016

Retail and hospitality businesses will be among firms most affected by the living wage for adults
Retail and hospitality businesses will be among firms most affected by the living wage for adults

One in four firms will be affected by the new national living wage, with many having to overcome "significant productivity challenges" to cope with the rate, according to a new report.

Research by the Social Market Foundation and the Adecco group found that retail and hospitality businesses will be among those most affected by the introduction of a £7.20 an hour wage for adults from April.

Paying the wage to over 25-year-olds will mean that employers will be faced with potential "discrepancies" in rates of pay for younger workers, said the report.

Almost a third of workers who will benefit from the wage are in jobs which do not require formal qualifications, the study found.

Nida Broughton, chief economist at the Social Market Foundation, said: "The low stock of skills amongst those affected, and the relative lack of access to in-work training, means that businesses and the Government will have to act to make sure that workplace productivity rises alongside the new regulated wage.

"If businesses can increase productivity there is less likely to be a risk of higher unemployment as a result of the introduction of the national living wage, and workers will be more likely to benefit."

Alex Fleming, managing director of Adecco Group UK and Ireland, said: "The national living wage has the potential to reduce wage inequality and improve people's lives across the UK.

"The challenge for businesses, particularly in sectors including retail, wholesale and hospitality, will be in mitigating the impact of the new rate across their workforce and boosting productivity to avoid job losses.

"Businesses should consider training as one of the best ways to respond. Many workers eligible for the rate are low-skilled with little further education beyond their GCSEs. This research shows the value of investing in training and skills for long-term.

"It is crucial that employers consider what these changes mean for them, rather than relying on a one-size-fits-all analysis of any potential impact."

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