New Living Wage to have bigger impact on northern employers

The introduction of the National Living Wage (NLW) will be felt more keenly by employers in big northern cities, according to new research.

Analysis by the Resolution Foundation suggests that a higher proportion of workers in cities such as Sheffield and Nottingham will be affected by the change than those in cities such as London and Cambridge.

The NLW is set to be introduced on 1 April, with workers aged 25 or over eligible for a minimum rate of £7.20 per hour. This will be raised to at least £9 per hour by 2020.

It is estimated that around 6 million employees will be affected over the next five years. This includes direct recipients of the NLW, who currently earn under that rate and will be brought up to meet it. It also includes indirect recipients, such as workers who currently earn the NLW or above but will still see their pay rise as employers look to keep pay differentials intact.

While many have welcomed the introduction of the NLW, many businesses, particularly those in the service sector, have expressed reservations. According to a CBI survey, more than half of service sector businesses said they would have to raise prices and 27% said they would be forced to employ fewer people in order to absorb the new wage requirements. Anecdotally, some fear that the NLW could be an extra burden that could leave them in serious difficulties and could even lead to company insolvency if they are unable to get their finances in order.

The study by the Resolution Foundation found that 28% of the workforce in Sheffield would be affected by the change. This represented 140,000 people in total. 27% of workers in Nottingham and 26% in both Birmingham and Leeds would also be affected. This compares to 15% of workers in Cambridge, 14% in London and 13% in Oxford.

Major cities in Scotland meanwhile tended towards the middle of the results, with 18% of workers in Dundee, 17% in Edinburgh and 16% in Aberdeen being affected by the changes.

By Phil Smith

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