Majority of buyers believe living wage will not push up supplier costs

Will Green is news editor of Supply Management
2 August 2015

A clear majority of buyers do not believe the living wage announced by chancellor George Osborne will push up supplier costs, a survey has found.

The SM Jury voted by eight to four against when asked if they were concerned about the impact of a living wage.

In his budget Osborne said the national living wage would be introduced from next year and rise to £9 per hour by 2020, which has led to warnings of rising costs for the social care sector.

Lee Parkinson, director of Parkinson Procurement Solutions, said he led Efficiency North, a social housing consortium, and in contracts they stipulated payment of the living wage and those contracts were “more efficient that those procured by our members”.

“So any rhetoric about living wage or social value clauses adding cost are for the commercial dinosaurs who probably still wear pinstriped suits and red braces,” he said after voting ‘no’.

Darren Niblo, procurement coordinator at Falkirk Council, also voted ‘no’. “The delivery of high quality public services is critically dependent on a workforce that is well-motivated, well-led and has appropriate opportunities for training and skills development,” he said.  

“Employers paying the living wage is one factor that helps deliver this. My own experience of providers that apply this is that there has been little if any uplift in total cost as they quickly realise they achieve further tangible benefit of a more engaged and motivated workforce.”

Gary Moore, procurement performance manager at BAE Systems, agreed. “Unless you are a ruthless capitalist who would only be happy at employing slave labour, then the reasonable threshold set by the living wage can only be welcomed in the sort of society we would choose to live in.”

However, others were concerned that labour costs would rise as a result of the living wage and this would impact the wider economy.

John Randles, group purchasing manager at manufacturer GAP, voted ‘yes’. “Nothing in this world is free and suppliers will try and push this increase in their cost base back down the supply chain,” he said.

“The economy is just recovering and this could make things very difficult for businesses trying to invest and grow and could well end up having a negative effect on future employment with businesses looking more towards automation to exclude these rises from future years.”

John Milne, procurement consultant at Hampco, also voted ‘yes’. “It is a vote winner for sure but goes nowhere close to solving the problem of poverty or the equitable distribution of wealth and economic resources,” he said. “All it does is create a false bottom, pushing wages, manufacturing and distribution costs higher, leading to inflationary prices and job losses resulting from a declining position against international competition.”

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