New Low Pay Commission blog: What does the NLW have to do with the price of fish?

22 January 2021

The Low Pay Commission (LPC) is responsible for advising the government in relation to the National Living Wage (NLW) and the National Minimum Wage (NMW). It has published a new blog, which discusses what impact the NLW has had on businesses since its introduction back in 2016.

Some of the questions that are asked relate to whether companies have had to reduce employment, increase their prices or make any other changes to the way in which they operate since the introduction of the NLW.

Frontier Economics were commissioned in 2019 to explore these questions, and the findings subsequently influenced the LPC’s recommendations to the government. The findings were published in December 2020.

The research was divided into two sections – one which assessed the impact on businesses, and another that investigated the impact on prices.

The research highlighted the fact that, although the NLW has resulted in increased pay for a number of workers, this has not had any subsequent significant impact on businesses or consumers. Whilst it is recognised that employment growth has been slower in businesses that tend to pay the minimum wage, this is part of a longer-term trend and not directly attributable to increases in the NLW. There is evidence that shows that price rises occur in the months that the minimum wage is increased, but that it has a relatively small effect. Furthermore, the evidence demonstrates that increases in the NLW recommended by the LPC have not had any substantial negative impacts. The LPC recognises, however, that it will be more important than ever in the future to understand how firms are coping and how any potential further increases may affect them. The LPC will continue to research and converse with businesses to inform its recommendations to the government.

 


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