Will pubs pay the price of a minimum wage rise?

The Government wants the National Minimum Wage (NMW) to rise to £7 next year, arguing that its value has fallen in real terms since the economic downturn began in 2008, and the country “can now afford” above-inflation increases.

The Chancellor George Osborne has written to the Low Pay Commission — the body that advises the Government about NMW rates — ahead of a decision in the next few weeks about how far to raise the hourly level from the current £6.31.

Real cost​

A rise of 69p per hour may seem like peanuts when taken in isolation, but when you examine more closely the impact this uplift would have on small businesses like pubs, then the real cost becomes apparent.

Business support organisation the Forum of Private Business warned that a 50p rise in the NMW — lower than the Chancellor is recommending — may sound innocuous, but to a firm employing nine members of staff it equates to an extra £9,000 in costs per year before any pensions or employer benefits are taken into account.

There’s also the “multiplier effect” of raising the NMW. Not only does it cause wage inflation higher up the pay scale, but it also means an increase in the cost of other employment benefits offered by the majority of firms, such as pensions.

Sustainable​

I’m sure many licensees aspire to pay their employees more than just the minimum rate, and I’m sure in practice many do so. But for some the pressure to increase it will inevitably lead to jobs coming under threat.

With many licensees struggling with spiralling costs in other areas of running their businesses — for example, rent, utilities and beer prices — the last thing the trade needs is an inflation-busting rise in the NMW, heaping further overheads on it. The Government’s efforts to tackle the so-called
“cost of living crisis” should not increase the costs of doing business.

This is not meant to be a mean-spirited denunciation of the aims and ambitions of the NMW, which is rightly one of the most applauded policies introduced by any Government over the past 50 years, but more a reality check on what is sustainable for employers.

Ambitions​

We’ve written extensively in recent times about how pubs can help in tackling the current high levels of youth unemployment and how they are great environments in which to introduce young people to the world of work.

The pub sector is already one of the most highly taxed, so piling further costs on the trade will inevitably mean those ambitions will fall by the wayside.

And that would be a crying shame.