Compulsory Living Wage would cost London businesses £612m

– This yearly wage bill is equivalent to 32k hospitality jobs in the Capital
– Use small business tax cuts to boost wages without the need for sackings

Making the London Living Wage compulsory would cost London’s businesses £611.8m every year, the equivalent of 32,287 jobs in the hospitality sector.¹

GLA Conservative Tony Arbour, who calculated the figures, is calling for wages to be raised through business rate relief for smaller firms and VAT cuts in the hospitality sector.

GLA Conservative Assembly Member, Tony Arbour, said:

“We need to think practically about how get more Londoners on the Living Wage. It’s an ideal win-win situation for business, employees and the public purse. It puts more cash into people’s pockets and improves working conditions. But forcing firms to sign up to this, especially start-ups and small businesses – such as B&Bs, restaurants and coffee shops – will only hurt them and may even put them out of business. What we need instead are common-sense measures, such as tax cuts, designed to ease the burden on small business whilst boosting pay for employees. First, we need to give business rates relief to small businesses that sign up to the Living Wage. Next, we need to cut VAT in the hospitality sector. I will work with the Mayor of London and lobby the Government, to make sure pay can be boosted without the need for price hikes or sackings. These tax cuts will pay for themselves through reduced dependency on in-work benefits and increased tax-revenues.”

 

Case Studies

 
Jean-Phillipe Tessier, restaurant owner, Greenwich, said:

"In France, where I come from, there is too much tax and regulation which stifle business owners like myself. That's why I came and invested in the UK. My restaurant has been running for six months and I employ five people on £7 per hour. On busy days, they can easily double this figure in tips. A blanket mandatory London Living Wage would be counter-productive. It just wouldn't work in this industry."

Adrian Fiwak, 19-year old student in Haringey, said:

“I’ll soon be looking for a part-time job in retail when I go to university, and I hope to get about £7 per hour for a customer service job in retail. I don’t think the living wage should become compulsory. I feel it’ll be harder to get a job if everyone is paying £9.15 an hour. It’ll be harder for people like me, who don’t yet have much experience.”

Augustina, 18, full-time waitress, Greenwich, said:

"I earn £7 per hour and can double this with tips on a good day. Of course I'd like more money to help out with my rent, bills, petrol and other expenses but at the same time I understand why the London Living Wage is not compulsory for good employers like mine. I want to see the kind of job opportunity I have for other people too."

Peter Duggan, Bar owner, Tower Hamlets:

“I employ 8 people and pay them between £6.50 and £8.00 per hour. I value them immensely and want to hold on to them, in order to do that, I know I need to pay them the best I can. I feel terrible that I can’t yet pay them the London Living Wage but frankly if it is made compulsory, it would put me out of business. I would have to cut staff in order to meet the increased wage bill which is unthinkable, as the customer demands great service. And we need people in order to fulfil this. I have to increase sales anyway in order to make a fair living wage for myself. We’ve been going for three years and we’re still constantly on the line. I pay myself £10k a year even though I do six-day weeks. What would help people like me is a VAT cut for the hospitality sector. I pay about £7k a quarter just in VAT, it’s a killer.”

Hakan Gulcelik, Off Licence owner, Tower Hamlets, said:

“I’ve got one person working here, and he’s on £6.79 an hour. It’s tough owning an off licence. I spend over £2k a quarter just on VAT, £420 a month on business rates alone, plus rent and rates on top. I’d pay the London Living Wage tomorrow if I got some relief on my massive tax burdens. But if it becomes compulsory, I know about 20 people in my position who would go under in a flash.”

Tariq Mohammed, 17-year old college student in Haringey, said:

“I’m looking for part-time work. If I get offered a job for £7-£8 per hour in retail tomorrow, I’d take it. I think that’s a fair wage for what the job would require. I get that some employers can’t afford to pay everybody the living wage.”

 

Notes
1. The total cost to the London was calculated by subtracting the current yearly wage bill for those on minimum wage from what the yearly wage bill would be if these same workers were on the Living Wage. According to the Low Pay Commission there are 111,000 minimum wage jobs in London. The National Minimum Wage was calculated at £6.50 and the Living Wage £9.15
2. The cost per job was calculated using figures derived from the ONS Blue Book and Labour Market Statistics. In 2012 (last full year of data), the hospitality sector generated £36.544bn for the economy. There were 1,929,000 people employed by the industry at that time. Thus, £18,950 is required to support one job in this industry, which includes wages, training and other business running costs. (GVA/total jobs)