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Businesses say yes to Living Wage but ask government to be cautious

3 min read

25 September 2015

Despite concerns over the effect on prices and jobs, businesses are largely in support of the new Living Wage.

British companies have provided backing to the new national Living Wagse but are urging the government to take care over future minimum wage rises.

The Institute of Directors, in response to the Low Pay Commission consultation closing today, said it “cautiously welcomed” the living wage which will see the hourly rate for over-25s hit £7.20 next April.

“In many ways, the UK has a good jobs story to tell. Unemployment is low and vacancies are at a near record high. But one of the biggest disappointments of the recovery has been slow pay growth for workers. The chancellor has decided that now is the time to reward employees for their patience during the recovery and has offered businesses a lower tax deal in return,” said Seamus Nevin, head of employment and skills policy at the IoD.

“IoD members already recognise the benefits of letting their staff share in their success. Nine out of ten pay the full Living Wage, as set by the Living Wage Foundation, so they will mostly be able to accept the chancellor’s bargain. 

“Nevertheless, government cannot ignore the potential jobs cost, especially in the hospitality, retail and care sectors. The minimum wage must not become a political competition to see which party can offer the most, irrespective of what the economy and employers can afford. 

“The independent Low Pay Commission has done a good job in balancing the rate against inflation, economic growth and the effect rises would have on small businesses and people entering the jobs market. The chancellor must resist the temptation to turn the new national Living Wage into an instrument of political strategy.”

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Nevin said the only way to ensure sustainable pay rises was to increase the productivity of the workforce and the performance of our companies.

“In that regard, businesses are keen that the chancellor must come good on his part of the ‘deal’ struck in the Summer Budget and deliver on promises to cut corporation tax and raise the Employment Allowance sooner than later,” he said.

In recent weeks major companies such as retailer Next, which said shop prices would have to rise, pubs chain JD Wetherspoon, which indicated it would make it harder for pubs to compete with supermarkets, and JD Sports, which revealed future expansion could be affected, have raised some concerns about the effect of the living wage on business.