NO SOONER HAD George Osborne announced the government’s plans to effectively replace the minimum wage with a “national living wage” than the press statements started to flood in. Some felt it was “reckless”, others prophesied job losses.
The Living Wage Foundation on the other hand was “delighted” with the news – albeit with some caveats.
The chancellor’s proposed wage – £7.20 from April next year, rising to £9 by 2020 – is below that calculated by the Living Wage Foundation (£9.15 in London and £7.85 outside). It also applies only to over-25s. A recent story by the Independent highlighted some of the “flaws” emerging in the government’s “showpiece work policy” included the hundreds of thousands of apprentices aged 25 and over who could miss out on the pay rise.
Excluding under-25s and apprentices was a “shameful sleight of hand”, according to the Unite union’s assistant general secretary Steve Turner. “Osborne’s national living wage is becoming more and more like one of those dodgy supermarket deals,” he added. “You think you’ve got a good offer, but look at the small print and you’re getting conned.”
Retailers were also inclined to tell the chancellor to bog off. Pete Cheema, the chief executive of the Scottish Grocers’ Federation, called it “a reckless policy which could have a disastrous effect on the retail industry”.
The British Hospitality Association was equally miffed with the “surprise” announcement. “Despite the chancellor trying to alleviate the pain with adjustments to corporation tax and employment allowances, these changes do not go far enough to reduce the impact on [smaller businesses] and mitigate potential job losses across the industry,” said its chief executive, Ufi Ibrahim. An online poll by Footprint found that 53% of readers said the government’s announcement would result in job cuts.
The Food and Drink Federation suggested the impact wouldn’t be quite as dramatic as that. “The counterbalance of a reduction in corporation tax and national insurance contributions will go some way in helping food and drink manufacturers to manage this change,” said its director general, Ian Wright. “We support the national living wage in principle and many of our leading members have already made individual commitments to pay the living wage.”
Whether that’s the government’s figure or the higher one calculated by the Living Wage Foundation is not clear. There is concern that Osborne’s attempt at a political quick win could undermine years of work encouraging 1,588 employers outside the capital to pay £7.85 and those inside to stretch to £9.15. Will companies go further than the new baseline?
It’s unlikely many smaller companies will. For the larger firms in the food sector, campaigners will continue to argue that the benefits outweigh the costs. For instance, an independent study examining the business benefits of implementing a living wage policy in London found that more than 80% of employers believe that the wage had enhanced the quality of the work of their staff, while absenteeism falling by approximately 25%.
Two-thirds of employers reported a significant impact on recruitment and retention within their organisation. Meanwhile, 70% of employers felt that their commitment to pay staff more had increased consumer awareness of their organisation’s commitment to be an ethical employer. As the Sodexo boss, Debbie White, told Footprint in January: “I’m a strong believer that businesses should be held accountable for things where they can have a major impact on the community in which they live and work.”
Good or bad, ill-thought-out or well-intentioned, what the chancellor has done is thrust the living wage debate firmly into the spotlight. Sodexo is one of the companies looking for solutions rather than complaining of the problems. It’s a big player in the industry of course, but there are others. Many have so far hidden behind the statements pushed by sector representatives. They won’t be able to for much longer.