Are promises about The National Minimum Wage sustainable?

candidate, client, Accountacy...

When the National Living Wage was originally introduced, it was not supposed to cripple businesses whilst at the same time ensuring that employees were paid fairly. We now have both Labour and the Conservatives promising significant increases.

The Conservatives have pledged to raise the National Living Wage to £10.50 within the next five years and to reduce the age for those who receive it from 25 to 21. Labour meanwhile wants to increase it to £10 an hour and to include all workers under the age of 18.

Whilst it is truly commendable that both sides want to end low wages, there is a third element in the equation and that is the companies who are expected to find this extra amount - and it will not just be the extra amount for the lowest paid. In order to keep a differential between workers, they will no doubt be faced with pressure to increase the wages of all employees. This is on top of all the other employment costs, which have been loaded on to them in recent years. These include the apprenticeship levy, previous increases in the National Living Wage and added pension costs. 

It seems that government and opposition alike have the impression that money grows on trees and all businesses have to do, is to reach up to the branches to pick some off and hand it out to deserving workers. Sadly, this is not the case and for many smaller enterprises or in those commercial areas where margins are small such as the retail sector, further large increases to staffing costs could be the straw which breaks the camel's back. Job losses could occur so that the books can be balanced and people could find themselves out of work, rather than feeling wealthier. In addition, the costs of paying people more will have to be passed on to the consumer resulting in inflation.

Raising people's wages is a laudable ambition and an apparaent vote winner but politicians need to be careful that in zealously pursuing it, they don't actually achieve the opposite and put people out of work.

Have a good week.