The National Living Wage is sending "shockwaves" through the UK labour market as small businesses scale back recruitment plans to prepare for the extra pressure of having to pay more in wages.
"The national living wage is sending shockwaves through the UK labour market," said James Hick, UK managing director of ManpowerGroup Solutions, which surveyed 2100 employers. "It's one factor that's creating a concern about whether to take people on or not."
Mr Hick said job prospects are at their weakest since 2012 as a result. Analysts have warned that some employers will struggle to pay the living wage of £7.20 an hour when the rules come into force in April. Retailers, care workers and cleaners are expected to be badly affected. The Office for Budget Responsibility said 60,000 people could lose their jobs.
Mr Hick said that employers may look to mitigate this by hiring people below the age of 25, who do not have to be paid the £7.20 minimum. “This may be a good thing but pushes younger and younger people into work like care work, for example,” Mr Hick told the BBC.
He noted that the worst affected areas are in the North. London is twice as optimistic as the national average. “It's this proliferation of small businesses in London that is bucking the trend. There's been a tech boom in London,” Mr Hick said.
Osborne declared that the Conservatives were "the party of the working people" when he announced that a new ‘living wage’ would raise hourly rates to £7.20 by April 2016 for the over 25s, with a further increase of £9 per hour by 2020.
However the Living Wage Foundation, which calculates the amount a person needs to live on using economic data, said that the average person needs £7.85 an hour and £9.15 in London – already short of Osborne’s rate.
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