Productivity push can help soften impact of NLW

Foodservice and hospitality businesses are failing to adopt existing practices and technologies to help them manage the impact of the national living wage. Instead, they are offsetting the higher wage bills by reducing overtime pay, for example, or raising prices – neither of which is sustainable in the long-term, according to new research by the Institute for Public Policy Research.

 The lack of investment stems from low awareness of the benefits of productivity-boosting actions and limited motivation (prior to the NLW) to act given relatively low labour costs, claimed IPPR in its analysis of low wage sectors.

“In response to a higher wage bill we would ideally want firms to invest in productivity-enhancing technologies and training, or to review their business models to find more efficient ways of doing things,” the IPPR noted. “Our analysis suggests that our low-wage sectors don’t need to invent new ways of doing things.”

For a start, the UK’s low wage sectors are “less productive” than their equivalents in western Europe. IPPR urged businesses to establish degree apprenticeships and make more of the available information and communication technologies. The government, meanwhile, should expand funding to innovations in workplace organisation, job design, leadership and management.

An increase in productivity would lead to a “virtuous cycle of higher pay, higher productivity and higher economic growth”, IPPR said. Reductions in non-wage benefits or training and higher prices, on the other hand, “may not be sustainable over the long-term”.

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