Reality bites with the real cost of the living wage

Antony Begley

The national living wage is a complex subject, fraught with moral as well as commercial implications. There can’t be many retailers out there who disagree with the principle of paying their staff a decent wage – but there’s a commercial reality framework within which that ever-increasing cost has to exist and it’s that commercial reality that is set to have the final say.

In crude terms, it’s all very well continuing to hike wages every year but there comes a point when the business paying those wages simply can’t cope any longer and is no longer commercially viable. What happens then? The answers to that question are becoming more obvious every day as more and more retail businesses seek to reduce their staff cost overheads to simply stay alive by cutting hours or staffing levels. Others resort to more drastic methods where people are replaced where possible with cheaper and more reliable technology and machines, self-scan tills being an obvious example.

These will be the unintended consequences of a well-meaning government policy – and it’s time that the government really sat up and took notice because this problem could move beyond a tipping point very, very soon. And once we’re passed that tipping point, there may be no return.

Some light has been thrown on this issue by a new study carried out by the Institute for Retail Studies of the University of Stirling on behalf of the SGF. The data for the study was volunteered by retailers across Scotland – including our own Woodlands Local – and was designed to try to pin down the true cost of the living wage to retailers, not just the headline £7.50 an hour cost.

The actual cost, including all the other add-ons involved such as pensions, national insurance and maintaining wage differentials between different tiers of staff, comes in at a whopping £9.66. That’s an ‘extra’ cost of 29% over and above the headline £7.50 level for those over 24.

For a typical convenience store, the increased minimum wage each year probably adds upwards of £3,500 to the wage bill annually. This means that, on a typical 20% margin, the store needs to increase sales by around £17,500 a year just to stand still. That is unsustainable, pure and simple.

SGF has sent this data directly to the Low Pay Commission for inclusion in its report and recommendations to the Prime Minister and we can only hope that some note is taken of these findings – and before it’s too late.

It’s time for the government to get creative on finding ways to support an industry it routinely describes as invaluable to communities in every corner of this country.

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Antony Begley, Publishing Director