Any jobs cut as a result of the new national living wage will not come in London, according to think tank Centre for London.
With employers having to pay over 25 year-olds at least £7.20 per hour from April 2016, rising to £9 by 2020, the Office for Budget Responsibility (OBR), the CBI and other business groups have said that the new national living wage will cause job losses.
But a report published by Centre for London, written by by Kitty Ussher, a leading economist and former Treasury Minister in Gordon Brown’s Labour government, says job cuts will not affect the capital.
In the past the national minimum wage has been set by the Low Pay Commission at a level that will not harm employment. Centre for London used the Commission’s modelling techniques to measure the workforce impact of the National Living Wage (which has been set relative to median wages rather than employment impact) on London’s unique economy. Despite many institutions including the CBI warning that the National Living Wage will lead to job losses nationally, the new report shows that London employment will not suffer.
The findings highlight 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. US cities such as Seattle and San Francisco have successfully introduced city-wide minimum wage levels to the benefit of the city and the surrounding area.
Report author Kitty 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, said: “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.”
Bharat Mehta, Chief Executive, Trust for London, 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."