Minimum wage: preparing for the living wage 'shockwave'
8 September
Big businesses are stepping up their campaign against a higher minimum wage, due to begin rising in April, with a series of warnings that profits and jobs will be put at risk – and one recruitment firm claiming that the "shockwave" in employment in the UK has already begun.
Manpower says that job prospects for the rest of the year are "dwindling" and have "reached their weakest for three years", The Times reports. Warning that "some employers are thinking twice about taking on new workers", it said there is already a noticeable reduction in hiring plans "in the run-up to the traditionally frantic Christmas trading season".
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Manpower also echoed previous warnings that some employers "might try to bypass the legislation altogether" by hiring "younger or self-employed workers" who are not eligible for the minimum wage. The new rate, which starts at £7.20 next April and will rise to more than £9 by 2020,
applies only to over-25s.
The Guardian notes there has already been "a surge in the number of self-employed people since 2001, which some economists have blamed in part on the minimum wage". There are restrictions – a worker who performs a set task in a set location every day will probably be considered a direct employee by law – but Manpower says more and more mainstream sectors may begin to adopt the practice, especially "where the internet allows workers to be managed remotely".
Elsewhere, Costa Coffee and Premier Inn owner Whitbread Group warned it would have to increase prices to cope with the new lower rate, the BBC reports. It added it would seek to offset the cost by making savings and boosting worker productivity.
The latter development would be welcomed by economists, who have long bemoaned meagre productivity rates in the UK, which they say lie behind the weak recovery. It also echoes the sentiments of another recruitment firm, Flex Recruitment Plus, which wrote in July that the minimum wage would be "good news for both workers and employers", but only if it was accompanied by increases in output.
Will higher minimum wage help close the gender pay gap?
03 September
The new minimum wage for over-25s, which will be phased in from next April, could help to close the gender pay divide, with women set to be by far the biggest beneficiaries of the higher rate.
The BBC examines a study by the Resolution Foundation predicting that of the six million workers who will receive a pay rise as a result of the new 'national living wage', 3.7 million will be women. This includes those who are currently paid less than the level at which the new rate will be set, as well as those above that level whose pay will increase as a result of a "ripple effect" as employers maintain "pay gaps between different workers".
The new minimum wage will be set at £7.20 initially, and then rise to 60 per cent of median earnings by 2020. That figure is expected to be as high as £9.35.
The report also breaks down the effect of the change by region, suggesting that workers "in areas including Yorkshire and the Humber, the Midlands and Wales were expected to be among those benefiting most from the higher wage".
Resolution said that the effect on the gender pay gap would be "positive – though modest", with the average wage rise for those set to benefit likely to be £1,210. The changes will disproportionately help part-time workers, another group that includes more women than men.
But it is not all positive. The Guardian says the think tank predicts that many poorer households will lose out from other provisions in the summer Budget, especially as the result of restrictions on tax credits. Annual net income will be around £800 less for the lowest-earning 20 per cent of families, with middle income families estimated to be between £200 worse or better off.
Previous research from the Social Market Foundation found an average two-child family with one earner could lose hundreds of pounds a year, while if both parents worked it would be more than £6,000 a year better off.
Minimum wage: Cameron prepares for battle with businesses
01 September
It is a somewhat unexpected political dynamic: prime minister David Cameron, heading a majority Conservative government, is preparing for a major battle with businesses over his interventionist plans to accelerate the minimum wage.
Writing in The Times today, Cameron emphasised the party's "one nation" message and attempt to take over Labour's traditional role as the perceived "party of working people", of which the new 'national living wage' is a key policy pledge.
Essentially a higher minimum wage for over-25s (rates for younger people will be kept at a lower rate set by the Low Pay Commission), the new rate of £7.20 per hour will be introduced in April 2016 with the aim of "giving low-paid workers a £20 a week rise". The higher minimum wage will reach above £9 by 2020.
The prime minister warned those who oppose it that the government will get tough with businesses that do not play ball.
"We've already doubled the fines for non-payment of the national minimum wage — and we will double them again for that and the national living wage… We will significantly increase the enforcement budget, set up a new team in HMRC to take forward criminal prosecutions for those who deliberately don't comply and, from this autumn, ensure that anyone found guilty will be considered for disqualification from being a company director for 15 years."
The comments come on the day a fresh warning on the policy was issued by John Cridland, director-general of the Confederation of British Industry. He told the Daily Telegraph that the push to increase low pay faster was a "gamble" and that it was "not obvious that businesses will be able to cope with that level of imposed wage cost increases" without cutting jobs.
This echoes similar remarks to the BBC made by the former chief executive of Sainsbury's – which has already upped wages above the living wage rate coming in next April – that boosting the lower rate of pay for over-25s could not be "economically justified" and that it would push firms to increase productivity at the expense of jobs. Weak productivity is, though, a key concern for economists, so such a move would be welcomed by some.
Other business figures are positive about the change. Danny Breithaupt, chief executive of the company that owns Frankie & Benny’s and Chiquito, told The Times that workers at his restaurants would get the full benefit of the new rate and it will be "good for the industry". He explained it is "important that people see this as a career choice because that means we have less staff turnover and that helps reduce costs".
Minimum wage: Sainsbury's betters new national living wage
27 August
Sainsbury's has responded to calls from campaigners against low pay and increased wages for all of its staff, in the process becoming only the second of the 'big four' supermarkets to better the new national living wage that comes into effect next April.
The Guardian reports that the basic rate offered to its store workers will rise next week by four per cent from £7.08 to £7.36 an hour, above the £7.20 at which the new minimum will initially be set. The supermarket is also going one better by offering the rate to all of its fully trained workers irrespective of age, while the national living wage applies only to those aged over 25.
Tesco already pays above the incoming rate and slightly more than Sainsbury's at £7.39 an hour, but the pay deal is slightly less overall as staff are not paid for breaks. Of the other major food retailers only Marks & Spencer (£7.41) and Aldi (£7.25) pay above the incoming low threshold currently, with Co-operative joining the ranks when its standard rate rises from £6.73 to £7.28 from October.
Morrisons (£6.83), Asda (£6.89), Waitrose (£6.92 – plus profit share), Lidl (£7) and Iceland (£7.12) all currently pay less than the new rate. Between April 2016 and 2020 the Low Pay Commission will be tasked with moving the over-25s' minimum up to 60 per cent of median wages, which is expected to result in an eventual rate of £9 per hour.
Ratings agency Moody's has said supermarkets and others may struggle to meet the increases and take extreme measures such as concentrating hiring among under-25s, while companies in similarly low-paying sectors such as pubs have also complained of a hit to margins. Others counter that most are making sufficient profit to fund the rise and that wages have stayed too low for too long.
There have also been concerns over businesses reliant on local authority funding such as care services, which have said they broadly support the measures but up to £1bn in additional funding will need to be provided to meet the cost.
Minimum wage: care home owners say £1bn needed to fund living wage
20 August
George Osborne has today been warned that the higher minimum wage, which comes into force next April, could lead to a collapse in the care homes sector unless up to £1bn in new funding is found.
The bosses of the five largest care home providers, Four Seasons Health Care, Bupa, HC-One, Care UK and Barchester, have sent the Chancellor an open letter in which they say that staff salaries account for at least 60 per cent of their running costs and that profit margins are already tight. Unless more money is found, the bosses warn there is a "grave and very real possibility" of at least one firm going bust within two years and of a "catastrophic collapse" in the number of care homes, the BBC reports.
From next April, a new 'national living wage' for those aged 25 and over will set the minimum hourly rate at £7.20. This will rise to more than £9 by 2020. At a time when council budgets are overstretched, care has been frequently cited as a key area of concern since the change was announced last month.
The bosses stress that they "have always supported the Living Wage and feel that it is a recognition of the wonderful work that carers are doing", but that "if the government does not fund it, it would not be affordable", the Daily Telegraph notes. They say that a major collapse, reminiscent of the failure of Southern Cross in 2011, would add to the strain on the NHS.
The letter estimates the changes will cost the sector around £1bn each year by 2020. According to the BBC, the Government has said social care would be considered as part of the spending review later this year. The boss of another outsourcing care provider, Mears Group, said this week the increase in pay is likely to prompt a radical reform of care funding based on "a single ring-fenced settlement for both the NHS and social care".
A collapse in the number of care homes would have serious implications for the welfare of the old and frail. According to the Telegraph, the five largest care home firms look after 70,000 old people, a fifth of those in UK care homes.
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