April 4, 2014, by Kelly Cookson
National Minimum Wage vs Living Wage
In the February 2014 Business Barometer survey, our panel of UK small business owners and business advisers were asked about the effects of a potential rise in National Minimum Wage on their businesses and the feasibility of paying employees the higher living wage.
The responses from small business owners were as follows:
| George Osborne has signalled that he is willing to raise the National Minimum Wage to £7-an-hour, an above-inflation increase. The current minimum sits at £6.31-an-hour, with the chancellor indicating to the BBC that the increase to £7 was currently under consideration. What effect would this potential rise in minimum wage have on your business? | |
| Significant positive effect | 0 |
| Slight positive effect | 4.4% |
| No effect | 58.8% |
| Slight negative effect | 16.2% |
| Significant negative effect | 11.8% |
| Not applicable | 8.8% |
| To what extent do you consider minimum wage regulations to be an obstacle for your business? | |
| Very great extent | 1.5% |
| Great extent | 4.4% |
| Some extent | 17.6% |
| Little extent | 13.2% |
| Very little extent | 35.3% |
| Not applicable | 27.9% |
| The living wage is based on the amount an individual needs to earn to cover the basic costs of living. Because living costs vary in different parts of the country, there is a different rate for London and the rest of the UK (£8.80 for London, £7.65 for rest of UK).Do you currently pay your employees at least the living wage? | |
| Yes | 52.9% |
| No | 26.5% |
| Not applicable | 20.6% |
| Over the next 12 months, how likely are you to start paying your employees the higher living wage, if you do not already do so, rather than minimum wage? | |
| Highly likely | 7.4% |
| Likely | 2.9% |
| Unlikely | 17.6% |
| Highly unlikely | 11.8% |
| Not applicable | 60.3% |
UK business advisers were asked about the effects of changes in National Minimum Wage on their clients and the potential for them committing to paying the higher living wage:
| George Osborne has signalled that he is willing to raise the National Minimum Wage to £7-an-hour, an above-inflation increase. The current minimum sits at £6.31-an-hour, with the chancellor indicating to the BBC that the increase to £7 was currently under consideration.What effect would this potential rise in minimum wage have on your clients’ businesses? | |
| Significant positive effect | 2.2% |
| Slight positive effect | 6.6% |
| No change | 39.6% |
| Slight negative effect | 31.9% |
| Significant negative effect | 13.2% |
| Not applicable | 6.6% |
| To what extent do you consider minimum wage regulations to be an obstacle for the businesses that you advise? | |
| Very great extent | 1.1% |
| Great extent | 6.6% |
| Some extent | 29.7% |
| Little extent | 27.5% |
| Very little extent | 27.5% |
| Not applicable | 7.7% |
| The living wage is based on the amount an individual needs to earn to cover the basic costs of living. Because living costs vary in different parts of the country, there is a different rate for London and the rest of the UK (£8.80 for London, £7.65 rest of UK).What percentage of the businesses that you advise pay their employees at least the living wage? | |
| None | 6.6% |
| 1 – 10% | 7.7% |
| 11 – 20% | 4.4% |
| 21 – 30% | 5.5% |
| 31 – 50% | 12.1% |
| Over 50% | 44% |
| Don’t know | 19.8% |
| Over the next 12 months, how likely are your business clients to start paying their employees the higher living wage, if they do not already do so, rather than minimum wage? | |
| Highly likely | 3.3% |
| Likely | 17.6% |
| Unlikely | 37.4% |
| Highly unlikely | 14.3% |
| Not applicable | 27.5% |
Adviser panellist, Michael Reid, commented: “The whole concept of a minimum wage is a ridiculous one and prevents parts of the economy from being as flexible as they need to be to compete against overseas competition. Moreover, many of the self-employed work for much less than the minimum wage and zero hours contracts are another adaptation around the problem. Far from being a mechanism to raise the living standard of the least skilled it is a barrier to prosperity for all.”
A small business owner panellist working in the manufacturing sector commented: “Due to competition from imports we have not increased our machine rate in the last 15 years, whilst during this time minimum wage has increased 75%. We have survived by investment in quicker machinery and an improved product portfolio.”
The UK Business Barometer and UK Business Adviser Barometer surveys are ran by the Haydn Green Institute for Innovation and Entrepreneurship. The results of the surveys are instantly processed and posted on their respective websites: www.ukbb.ac and www.ukbab.ac
Businesses and advisers wishing to contribute as panellists on the project can register via the websites.
The UK Business Barometer has a group on LinkedIn and can be followed on Twitter @UKBB_UoN
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