Living wage leads to fewer hours and more work for staff, says report

The Resolution Foundation believes the situation is inevitable as “pay rises don’t come for free”.

Rather than make redundancies following the introduction of the national living wage, employers in low-paying sectors have asked staff to work fewer hours and do more under increasingly casual contracts, according to a new report.

The research conducted by think-tank the Resolution Foundation, which aims to improve the living standards of UK citizens on middle- to low-incomes, found

that 52% of the 800 companies questioned in low paying sectors such as retail and hospitality now offered staff fewer hours.

About 43% were employing workers under more casual or zero hours contracts, while just over two out of five had asked their staff to take on more work. But despite dire predictions before the living wage was introduced, a mere 2% of companies have made redundancies, even though 47% said the move had increased their wage bill.

Around 27% said they had made changes to their staffing policies, with the most common approach being to hire fewer new workers than they would otherwise (62%). A further 18% had reduced pay rises for staff earning more than the living wage, 17% had cut their reward packages and 9% had reduced Bank Holiday pay.

Conor D’Arcy, the Resolution Foundation’s policy analyst, said: “Pay rises don’t come for free and many predicted the NLW would cause other negative effects such as job losses. Thankfully, that hasn’t come to pass as employers have responded by raising productivity, taking a profit hit and raising prices.”

The report indicated that over the next four years, 54% of companies plan to increase their prices to compensate for the wage rise from £7.20 per hour for over 25 year olds, which took hold in April 2016, to £9 in 2020