Pay rise for 1.3 mln British workers sparks debate on costs

More than 1.3 million of the lowest paid workers in Britain will get their biggest ever pay rise on April 1 when Britain's new National Living Wage (NLW) comes into force.

It will mean an instant pay rise for workers currently earning the national minimum wage which is set at 6.70 pounds per hour (9.64 U.S. dollars).

The 50 pence an hour extra will set the new NLW at 7.20 pounds, rising annually to more than 9 pounds an hour by 2020.

Industry experts are already counting the cost of what on paper seems a modest pay rise, but will add an estimated 1 billion pounds to the annual wages bill.

The Office for Budget Responsibility, the government's independent spending watchdog has warned that 60,000 jobs could be lost as a result of the new NLW which will apply to over-25s.

The British Retail Consortium, which represents major high street stores, has gone even further. It has warned that up to 900,000 retail jobs could be lost and thousands of shops closed across the country over the next 10 years due to the National Living Wage and the introduction of a new apprenticeship levy.

Some businesses may respond to the new law by cutting staff or reducing the hours employees work, with industry experts predicting there could be as many as four million working hours cut to keep wage bills lower.

Even with the new minimum wage, pay rates for millions of people are way behind the voluntary Living Wage which is set at 8.25 pounds an hour across the country and 9.40 pounds an hour in London.

The informal benchmark is fixed by the charity, the Living Wage Foundation and is not legally enforceable. Still a number of big FTSE 100 companies and a number of local authorities use the Living Wage for staff.

Gordon Dabinett, professor of regional studies at Sheffield University, Gordon says the new NLW of 7.20 pounds an hour is too low to survive.

He said: "Our studies have shown that it's not enough to live on. And therefore if they're not earning enough money, that leads to crisis in the household in a family and that leads to further problems such as debt and other associated problems."

But Dabinett believes that even if some jobs are lost as consequence of the NLW they'll be regained later.

"All the evidence from studies in America show that the introduction of a living wage has long term economic benefits," says added Dabinett.

By 2020 it is estimated by government officials that more than 6 million British workers will be better off as a result of Chancellor George Osborne's decision to introduce the new NLW.

Businesses failing to give workers the extra money face tough penalties.

Fines for non-payment of the NLW will be doubled, from 100 percent of the money owed, to 200 percent, to a maximum of 20,000 pounds for each underpaid worker. Employers found guilty can also be disqualified as a company director for up to 15 years. Britain's taxation department, the HMRC, has created a new enforcement team to pursue criminal prosecutions. Endit