Forced increases in wages through methods such as implementing the national living wage will hurt small firms, leading business groups have warned.
Among the sectors likely to be hit by the hike will be retail, according to the Confederation of British Industry.
Director general John Cridland said: “While business wants to see people earning higher wages and benefit from rising living standards, they must be driven by improvements in productivity.
“Artificially increasing pay is a gamble that will hurt smaller businesses, as well as those operating in care, retail, hospitality and food manufacturing,” he added.
The Institute of Directors said it “cautiously welcomes” the national living wage, but called for care to be taken over future rises.
“IoD members already recognise the benefits of letting their staff share in their success. Nine out of 10 pay the full living wage, as set by the Living Wage Foundation, so they will mostly be able to accept the Chancellor’s bargain,” said Seamus Nevin, head of employment and skills policy at the IoD.
“Nevertheless, government cannot ignore the potential jobs cost, especially in the hospitality, retail and care sectors. The minimum wage must not become a political competition to see which party can offer the most, irrespective of what the economy and employers can afford.”
The national living wage for over 25s will come into effect next April at a rate of £7.20 per hour and is expected to rise to £9 per hour by 2020. The national minimum wage for workers aged 21 and over is currently £6.50 per hour.
The warnings came as the Low Pay Commission — an independent body set up to advise the government on hourly pay — closed its public consultation on the minimum wage yesterday.
Think tank Resolution Foundation previously warned the impact of the living wage on retailers will be much greater than other industries.