Does the increased National Living Wage just mean more expensive coffee?

This week the BBC reported that Whitbread, the owners of The Premier Inn and Costa Coffee (amongst other things), may increase some prices to counter the cost of the National Living Wage (http://www.bbc.co.uk/news/business-34177370).

The National Living Wage is due to be introduced in April 2016. It will be a premium, expected to be 0.50, added on to the National Minimum Wage (see chart below for current rates) for all workers aged 25 and over.

The BBC reported that approximately 34,000 of Whitbread's 42,000 staff who are on an hourly rate receive less than £7.20 an hour. Whitbread's Chief Exec, while supporting a sustained increase, observed that: "The  scale of the increase is bigger than we would have expected and clearly employment costs are our biggest single cost”. Many employers would say the same. It also raises the concern that where the cost of the Living Wage is directly passed on to consumers and increases the cost of living, an employee feels the benefit on pay day but immediately loses it when they treat themselves to a fancy coffee to celebrate. As always, time will tell.

National Minimum Wage rate:

*For apprentices under the age of 19 or in their first year

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