National Living Wage to present bigger challenge in lower-paying areas such as Clackmannanshire, Dumfries and Galloway

Nearly one-third of all employees working in Clackmannanshire and Dumfries and Galloway are set to benefit from the new National Living Wage by 2020, according to new analysis published today (Monday) by the Resolution Foundation.

The analysis shows that the impact of the National Living Wage (NLW) – the new wage floor of £7.20 an hour for workers aged 25 and over, which comes into effect in April – will vary considerably across Scotland.

By 2020, around 500,000 employees across Scotland – 22 per cent of the total – are set to be affected by the NLW.

However, a far higher share of staff will see their pay increase in some parts of the country than others. One-third (33 per cent) of employees working in Clackmannanshire are set to be affected by the NLW. A similarly high proportion of employees working in Dumfries and Galloway (32 per cent) are also set to benefit.

In contrast, just 16 per cent of employees working in Aberdeen are set to benefit from the NLW, with Edinburgh (17 per cent), Dundee (18 per cent) and Glasgow (19 per cent) also less affected by the new higher wage floor.

While strongly welcoming the new wage floor, the Foundation notes that implementing it will prove a greater challenge in lower-paying areas. Minimising any job losses and ensuring that large groups of workers do not get stuck earning only the legal minimum should be a top priority for the Scottish government, the Fair Work Convention, local leaders and businesses across the country.

A focus on boosting productivity and progression in low paying sectors such as retail, hospitality, cleaning and care will be needed to ensure that the NLW is affordable for employers, says the Foundation. It is currently carrying out an employer-focused investigation with the Chartered Institute of Personnel and Development on how firms adapt to the new NLW.

The Foundation adds that, despite the name, the UK government’s new legal wage floor is not a ‘living wage’, and there remains plenty of scope to expand the reach of the voluntary living wage, which is currently set at £8.25 across the UK.

Conor D’Arcy, Policy Analyst at the Resolution Foundation, said:

“The welcome new National Living Wage will have a huge impact on low pay, particularly towards 2020 as it approaches £9 an hour.

“While our analysis suggests the pay rise should be affordable for most firms, implementing the new wage floor will be challenging for some employers. That’s particularly true in areas where wages tend to be lower. Politicians must work closely with employers to ensure that the National Living Wage is a success, particularly in low-paying sectors.

“It will take more than a higher wage floor to tackle Britain’s low pay problem. Governments and employers need to boost progression, making the most of employees’ existing skills and helping them to develop new ones. With the NLW set to rise significantly in coming years, it’s vital that positive steps are taken now before the higher wage floor begins to bite.”

Share of workers affected by the National Living Wage by 2020 across Scotland

The share of workers directly affected by the NLW includes employees whose pay will be lifted up to the new legal wage floor. The total share affected includes employees who already earn above the NLW but are still set to benefit as employers seek to maintain pay differentials between staff.