New research from the independent Centre for London think tank has moved to quell fears that the government’s new national living wage could see small businesses laying off staff as they cannot afford the rise.
In a report written by Kitty Ussher, a leading economist and former treasury minister in Gordon Brown’s Labour government, the think tank used the Low Pay Commission’s modelling techniques (which are currently used to set the minimum wage) to measure the workforce impact of the national living wage.
And despite many institutions, including the CBI, warning that the national living wage will lead to job losses nationally, the think tank claim that employment in the capital will not suffer.
However it did recognise the problems in applying a one-size-fits-all minimum wage across different regions.
While London could support a higher minimum wage in the long-term, setting a nationwide rate at a level suitable for London could have a negative impact on other parts of the UK.
The Centre for London pointed to the example of US cities such as Seattle and San Francisco have successfully introduced city-wide minimum wage levels as a potential solution.
Ussher said: “Our research shows that there remains a case for a London minimum wage: even after the introduction of the national living wage for over-25s, low paid younger people in London can get a pay rise without jeopardising jobs.
“But on top of that, it is now becoming clear that the 60,000 people across the UK who are estimated to lose their jobs as a result of the introduction of a national living wage, are unlikely to live in London.
“It is time for the Chancellor to explain where these job losses are likely to come, and what his plans are to support those affected.”
Ben Rogers, director, Centre for London, added: “There have been many warning that the new Living Wage will lead to job losses.
“This report shows that if jobs are lost they will not be in London – this could lead to an even wider economic gap between London and the rest of the UK. It is time for the government to take a closer look at the regional minimum wages which have been a huge success is American cities.”
And Bharat Mehta, chief executive of Trust for London, agreed that the time is right to introduce a localalised minimum wage.
Mehta said: “It costs between 20% and 50% more for different households to reach a decent standard of living in London than in the rest of the country.
“With poorer Londoners only getting paid around 12% more than their counterparts outside of the capital, there is a clear case for London having its own higher minimum wage.”