National living wage hurting UK productivity and low-wage sectors, claims think tank
The national living wage has had a detrimental impact on the UK’s low-wage sectors, a study by the Institute for Public Policy Research (IPPR) has found.
The think tank said that businesses are trying to offset the cost of the national living wage by cutting overtime, bonuses and other staff perks.
It said that the UK’s low-wage sectors, including retail, accommodation, food and administrative services, employ a third of all workers and produce 23 per cent of the UK’s gross value-added. However, on average they are 29 per cent less productive than the economy as a whole.
The think tank said today that the introduction of the National Living Wage has increased the salary bills for low-wage sectors, including retail and hospitality – and the extra costs have sapped the funding for investments in productivity and technology.
Workers in Britain’s low-wage sectors were found to be less qualified than their peers in Europe, while firms in the sector were less likely to offer training to their staff.
Read more: Job vacancies fall due to National Living Wage
IPPR called on firms employing low-wage workers to invest in productivity-enhancing technologies and training, or to review their business models to find more efficient ways of doing things.
The policy body’s recommendations included urging Innovate UK to use its open programme to expand its funding criteria to innovations in workplace organisation. It also suggested launching growth hubs to provide targeted advice to businesses in the low-wage sectors.
It went on to say that local partners should be encouraged to include their plans to prioritise the performance of their low-wage firms when they bid into the Local Growth Fund.
The think tank also advised businesses to establish degree apprenticeships for the biggest low-wage sectors, starting with wholesale and retail, to boost skills of employees.