National Living Wage Impacts Labour Market

The UK jobs market stands at its least optimistic level in three years according to Manpower Group, the world’s workforce experts. 

28/09/2015, news

After three consecutive quarters at +6%, job prospects are dwindling in the run up to Christmas and have reached their weakest point since the final quarter of 2012. UK firms' net employment outlook (the number of firms intending to hire staff in the next quarter minus the number intending to decrease their workforce) has dropped two percentage points to just 4%.

The Manpower Employment Outlook survey is based on responses from 2101 UK employers. It asks whether employers intend to hire additional workers or reduce the size of their workforce in the coming quarter.

Manpower’s data suggests employers are already feeling the impact of the national living wage, scaling back their recruitment plans in the fourth quarter of 2015. The policy will see 6 million people receive a 6% pay rise each year until 2020, but the office for Budget responsibility estimates that the extra costs could mean up to 60,000 job losses.

James Hick, Manpower Group Solutions Managing Director said:

“The National living wage is sending shockwaves through the UK labour market. Support services firm Interserve has announced that the extra annual wage bill for its 15,000 cleaners could amount to as much as £15 million or 12% of its annual profits. This sentiment was echoed by social care company Mears Group, which estimates the cost of meeting the wage hikes for its 4000 care workers will be £5million, or 10% of annual profits. Faced with a wage bill of this size, some employers are thinking twice about taking on new workers. 

James Hick went on to say “We anticipate that some employers may look to mitigate the extra costs by taking on more younger or self-employed workers who are not entitled to the national living wage.”

Source: Manpower Group, 2015