England & Wales, Ireland, Scotland Economy and regeneration

Employer Perspectives On The Future Of The Minimum Wage

Douglas White, Head of Advocacy at the Carnegie UK Trust explores the findings from their recent survey of employers regarding the future of the minimum wage.

This week we launched the second report in our series looking at the Future of the Minimum Wage with the Learning and Work Institute. This report, following our research into public attitudes and among low-paid workers, turns to the “Employer Perspective.”

When we began our series at the start of 2020, the policy of continually, incrementally increasing the Minimum Wage felt an established political norm. The UK Government had committed to a five-year path of increasing and expanding the Minimum Wage rate. Policy differences were mostly on questions of pace and level: there was a sense that much had been done but much was still to do, with in-work poverty impacting millions. We were interested in the impact of increases on workers, employers and the economy; and we wanted to shine a light on the relationship between the Minimum Wage and other important aspects of good work, such as job security, work intensity, in-work progression and training.

The nationally representative employer polling at the centre of this report took place just as the UK’s COVID-19 lockdown was being implemented. While our understanding of the full economic and social impact of the virus is still developing, the labour market feels drastically altered from where we began our inquiry. There is deep concern that unemployment is set to rise sharply, to unprecedented levels, biting hardest into sectors such as retail and hospitality where many workers are employed at the wage floor. At the same time, there has been an upsurge in public recognition for the efforts of key workers during the crisis, many of whom are on the Minimum Wage, and a widespread mood for ‘building back better’ and strengthening our social contract – including our relationship with the labour market.

We hope our report helps to inform the coming debate about the path of the Minimum Wage, by revealing the extent of employer support for minimum wage rises at the outset of the crisis, and a widespread appetite that government do more to help employers adapt.

Key Findings from our Employer Survey

  • Our nationally representative employer polling finds an overall majority of support for increasing the Minimum Wage: 54% of employers support the Government’s planned increases up to 2024, with only 9% opposed.
  • However, employers with larger numbers of low paid workers, as well as sectors hardest hit by the Coronavirus, are more concerned about a negative impact from planned increases on their business.
  • Over half (55%) of employers with over a quarter of workers currently paid less than £10.50 an hour (which is the Minimum Wage 2024 target) said a planned increase to this level would negatively impact their business. 41% of hospitality and leisure and 38% of retail employers said this.

Employers also perceive trade-offs when it comes to raising the wage floor. While 50% of employers said they would not have to make any changes to pay the minimum wage at a higher rate, others anticipate steps which could have negative consequences for workers:

  • 15% say they would hire fewer members of staff, potentially intensifying work for staff who remain as well as damaging employment levels.
  • 10% would increase the use of temporary or flexible contracts, which are correlated with lower worker wellbeing.
  • 10% would look to reduce staff benefits such as bonuses, breaks and discounts.

We asked what could support employers to raise the wage floor – without risking higher unemployment or facing these difficult trade-offs between pay and other aspects of job quality:

  • Our survey found 37% of employers want additional help from government to invest in skills and training.
  • 33% favour a temporary reduction in national insurance contributions.
  • Around three in ten employers wanted more advice and support from government to remain compliant (31%) and successfully adapt (30%) to an increasing minimum wage.
  • Just one in six (17%) of employers said they did not think government should provide additional support to businesses.

Paying the Minimum Wage in the ‘new normal’

As we are adapting to a ‘new normal’ in business models and facing a different equilibrium in our labour market, we may see attitudes to issues such as the Minimum Wage shift further.  Last week new CIPD employer attitudes data found a majority (58%) of employers would support a freeze on the current Minimum Wage rate into 2021. However, in the context of a deep recession, ensuring decent pay and combatting in-work poverty is arguably more, not less urgent. We require novel thinking about how the government might achieve its ambition to raise the wage floor. What can be done to support those industries particularly affected by the Coronavirus and prospective Minimum Wage increases? What about the interaction of wages with social security and with pressures on the cost of living?  How will the combination of these forces interact with the widely held ambition to ‘build back better?’

We will look at some of these issues in our final Future of the Minimum Wage report, to be published in the autumn. We would welcome contributions and insights into these critical questions. You can read our Employer Perspective report here, and please don’t hesitate to get in touch to let us know what you think.

This article was first published by the Carnegie UK Trust.

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