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National Living Wage begins to bite

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When the former Chancellor George Osborne announced plans for a National Living Wage in the 2015 Budget, Cumbria Chamber of Commerce warned of the potential to damage businesses.

A year on from its introduction in April 2016, evidence is mounting that higher wage costs have started to bite.

The Low Pay Commission has published its assessment of the impact of the National Living Wage, noting that smaller businesses have been more heavily affected than their larger counterparts.

The report shows that the number of people and the number of hours worked have fallen. Regionally, overall employment has also fallen in the North West – which includes Cumbria – the North East, East of England and Scotland.

Meanwhile, the Association of Convenience Stores (ACS) reports that three quarters of stores have reduced the number of staff hours in their business.

Of those that have laid off staff in the last 12 months, 76 per cent said it was because of increased employment costs.

Of those that have laid off staff in the last 12 months, 76 per cent said it was because of increased employment costs.

In February care providers cancelled contracts with 95 councils across the UK, because the local authorities were no longer able to offer an hourly rate sufficient to cover the care companies’ costs, partly as a result of the introduction of the National Living Wage.

Rob Johnston, Chief Executive of Cumbria Chamber of Commerce, said: “The National Living Wage was introduced with good intentions, to improve the lot of some of the lowest-paid workers.

“Unfortunately, it is hurting some of the very people who were supposed to benefit from it, as squeezed employers have been forced to get rid of staff or, at the very least, reduce their hours.”

He added: “This isn’t a case of greedy employers clawing back the increase in their employee’ pay.

“In reality, these are businesses that have seen their costs pushed up not just by the National Living Wage but by the recent business rates revaluation and by pensions auto-enrolment. They have no option.”

The National Living Wage for those aged 25 and over was introduced at £7.20 per hour but increased to £7.50 on April 1.

The National Living Wage for those aged 25 and over was introduced at £7.20 per hour but increased to £7.50 on April 1.

For full details of the rate changes, click here.

The Government has set a target for the National Living Wage to reach 60% of median earnings by 2020.

The Low Pay Commission’s projection for the rate of the National Living Wage in 2020 stands at £8.75 an hour, although this figure is subject to change.

© Cumbria Chamber of Commerce

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