National Living Wage yet to cause job losses in United Kingdom

Resolution Foundation, a London-based non-partisan think tank, released a report Monday showing evidence that the institution of UK’s three month-old National Living Wage (NLW) has not resulted in job losses for hourly workers.

Enacted in April, NLW is currently set at £7.20 per hour — approximately $9.60 — for employees 25 years of age and older.  Workers under 25 are subject to the hourly National Minimum Wage of £6.70.

To compensate for increased labor costs to-date, of 500 UK businesses surveyed, 36 percent said they have increased the sale price of items; 29 percent accepted lower profits; 38 percent asked workers to be more productive OR used less labor OR reduced overtime or paid breaks; 12 percent invested in more technology.

Despite the positive labor market news so far, Resolution’s survey was conducted before the vote to leave the European Union (EU). Many economists project leaving EU may have a negative effect on UK’s annual GDP and bring wage rates down with it.

Indeed, the report admitted that “Brexit” could decrease real wages in the British Kingdom by as much as 40 pence an hour by 2020 for those subject to NLW.

Originally, UK’s Office of Budge Responsibility projected NLW would cause a decrease of 60,000 jobs by the end of the decade.

The survey also asked employers what they plan to do in “the next five years”. Again, the most popular answer was “raise prices”, but only 18 percent said they’d accept less profit. Instead, 26 percent want their employees to be more productive; 21 percent indicated they’d utilize more employee training; and 27 percent said they’d hire more workers under 25 OR cut their workforce.

“The government wants to move to a higher wage, lower tax and lower welfare society and the National Living Wage is a crucial part of achieving this,” said a Department of Business Spokesman. “The Low Pay Commission will recommend the level of the NLW going forward to make sure that wages rise to reward workers while considering the impact on the economy.”

While the government’s goal is to increase NLW to £9 per hour (≈$12.00) by 2020, various projections for the actual rate, based on UK economic growth, vary only from £7.91 to £8.31.


[BBC] [Business Insider] [Photo courtesy]