I’ve been pleased to see this week more companies and sector organisations – in farming and the care industry – raising concerns about the chancellor’s decision to introduce a national living wage at £7.20 in April 2016, rising to at least £9 by 2020.
I think that many businesses and their representatives were shocked by this announcement in the budget, and that includes ACS. Our view was that this would be a huge issue for our sector that it would threaten members’ livelihoods, and that we needed to be saying this, even if it wasn’t popular with fist-pumping cabinet ministers or much of the general public. We called this policy “reckless” on budget day, and I stand by that.
I can understand why many businesses were wrong-footed and / or didn’t want to raise their head above the parapet, but I think that the more the full impact of the living wage has been considered and worked through next year’s budget planning process, the more it has dawned on all kinds of sectors and businesses just how damaging this policy could be.
Let’s be clear about the impact in our sector. Marginal stores (we know from our Cost Barometer project with the University of Oxford that many stores are operating on the edge of profitability – which can be viewed here: http://www.acs.org.uk/download/costs-barometer/) will close. In order to stay open, many other stores will cut back on staff hours, or raise prices, or cancel investments. All of these strategies could undermine the long-term competitiveness and viability of those businesses, and because the national living wage will continue to rise for at least four years, those strategies and adjustments and cost savings will be compounded year on year.
Let’s also be clear: there isn’t an easy lobbying fix here. There’s no consultation process on whether the national living wage should be introduced, and it’s such a crowd-pleaser that most of the political pressure has been for a higher national living wage. I’m pleased that much of the business, online and broadsheet press have called out the chancellor on the macro-economic risks of intervening in the labour market to this degree.
But for me, the best way forward for businesses themselves is to model the impact of the national living wage and to speak up clearly and publicly. By doing this we stand a chance of forcing a re-think in government, both on this specific issue and on other business costs that the government can influence. Business can’t be squeamish about taking this issue on.
