Most employers support increase in minimum wage but want government support to adapt

August 17, 2020

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New research shows there is broad employer support for further increases to the minimum wage, but that government must help businesses to adapt to a higher wage floor.

The report – based on a survey of over 1,000 businesses conducted at the outset of the coronavirus crisis – shows that over half (54%) support the UK government’s policy of increasing the national living wage to two-thirds of median income by 2024, with fewer than one in ten (9%) opposing this move.

The report – produced by Learning and Work Institute and Carnegie UK Trust – finds that most employers said that the increase would not have a negative impact on their business, or on wider UK employment. A majority (54%) of businesses said that a higher minimum wage could help boost UK productivity.

The report showed that there was more concern among the employers that would be most impacted by an increase in the minimum wage, and among the sectors hit hardest by coronavirus. Over half (55%) of employers with higher levels of low pay said the planned increase in the minimum wage would have a negative impact on their business, nearly double the figure for all employers (29%). Employers in hard hit sectors such as hospitality (41%) and retail (38%) were also more likely to fear a negative impact on their business.

While half (50%) of businesses said that they would not need to do anything to respond to a higher minimum wage, some employers said they would have to make changes which could have implications for consumers and workers:

  • 22% of businesses said they would pass the cost on to consumers;
  • 15% would hire fewer members of staff;
  • 10% would increase the use of temporary or flexible contracts;
  • 10% would also reduce staff benefits such as bonuses, breaks and discounts.

Most employers believe additional government support would be necessary to help employers manage an increase in the minimum wage. The most popular measure was additional help to invest in skills and training (supported by 37% of employers) followed by a temporary reduction in national insurance contributions (33%). Just one in six (17%) said government should not provide any support to employers.

Joe Dromey, deputy director for research and development at Learning and Work Institute, said:

Increasing the minimum wage could eradicate low pay, and help to tackle in-work poverty. Our research has shown that not only is a higher minimum wage popular among workers – it is supported by most employers too.

“The government can still deliver on their commitment to increase the minimum wage. But with higher unemployment as a result of the coronavirus crisis, we need to ensure that employers are supported to adapt.”

Douglas White, Head of Advocacy at the Carnegie UK Trust, said:

That most employers support a higher minimum wage is encouraging: even before the onset of the pandemic, there were too many workers struggling on low pay. The economic challenges caused by COVID-19 means it is even more important that future decisions around the minimum wage are ambitious in delivering better pay for low paid workers, while recognising the real challenges that many businesses are experiencing and providing them with essential support.  We hope the ideas put forward in our employers’ survey are a helpful starting point for a dialogue about how the government can pursue its ambition to raise the wage floor without endangering job quality or employment.’   

Contact:

  • Roisin Sheehy, external affairs officer, Learning and Work Institute, 07909 900 164, [email protected]

Notes

  • Carnegie UK Trust works to improve the lives of people throughout the UK and Ireland, by changing minds through influencing policy, and by changing lives through innovative practice and partnership work.
  • Learning and Work Institute is a policy, research and development organisation dedicated to lifelong learning, full employment and inclusion.
  • This is the second report in the project of The Future of the Minimum Wage, looking into how employers reacted to the introduction of and increases to the minimum wage in the past, how they feel they will be able to handle planned future increases, and what support they might need.
  • The government has committed to increasing the National Living Wage to two thirds of median hourly earnings by 2024 – currently forecast to be £10.50 – and extending this to employees aged 21 and over.
  • The survey of 1,002 UK businesses took place between 17th and 23rd March 2020, at the outset of the coronavirus crisis. The poll was carried out by YouGov, and is representative of the UK business population.
  • A recent poll by CIPD found that a majority of businesses favoured a freeze in the National Living Wage next year.