This is according to a report from the Resolution Foundation: The first 100 days: early evidence on the impact of the National Living Wage.
The survey of 500 businesses found that around a third (35%) have seen their overall wage bill increase because of the NLW, though only 6% said it rose to a large extent. A further 16% of firms expect the NLW to increase their wage bill at some point in the future.
Of those organisations affected by the NLW, the most popular short-term action taken has been to increase prices (36%), followed by accepting lower profits (29%).
A smaller proportion of companies said they were cutting hours, employees or benefits. Roughly one in seven firms (14%) whose wage bill has increased said they have used fewer workers, offered fewer hours to staff, or slowed recruitment. One in 12 (8%) stated they have reduced aspects of their reward package, such as paid breaks, overtime or bank holiday pay.
Conor D’Arcy, policy analyst at the Resolution Foundation, said the NLW has already delivered a welcome pay boost to millions of employees.
“Encouragingly, evidence of workers seeing their hours cut or even losing their jobs has so far been relatively limited,” he said. “The challenge now is for firms to continue to respond positively to the National Living Wage, particularly by raising productivity.”
However, the report warned that the decision to leave the EU has significantly increased uncertainty about pay in the coming years. This will have a major knock-on effect for the NLW because it is set as a proportion of typical earnings.
The Resolution Foundation suggested that the real-terms value of the NLW in 2020 could be up to 40 pence lower than had been expected before the Brexit vote.
“Brexit is likely to reshape the landscape in which many low-paying sectors operate,” explained D’Arcy. “This means the expertise of the independent Low Pay Commission is more important than ever, and ministers should carefully heed its advice.”
