Justin King’s comments come after retailer announces 4 per cent staff pay rise
Former Sainsbury’s chief executive Justin King has warned that the compulsory national living wage will cause job losses when it comes into force in April 2016.
In an interview with the BBC, King called the £7.20 an hour pay floor for workers aged 25 and over "ludicrous", claiming it "is not economically justified".
The rise will put the living wage, introduced by chancellor Gorge Osborne in his July 2015 Budget, 50p an hour above than the national minimum wage of £6.70 an hour set to come into force this October.
However, King warned that as the living wage rises over time it could become as much as 10 per cent or 15 per cent higher than its minimum wage equivalent as it rises to it target of £9 an hour by 2020.
"The Low Pay Commission has done tremendous work on the minimum wage for many years," King said, however, he also said that the living wage "is not economically justified".
Indicating the potential fallout of the introduction of the higher pay floor, he said: "You can't talk about productivity without recognising that one of the consequences of productivity is less people producing the same output.
"Companies will invest in more productivity and as a consequence there will be less jobs."
In response to King’s comments, a Department for Business spokesperson said the government would ensure "work pays", while reducing reliance on benefits. “The new national living wage is an essential part of moving to a higher wage, lower tax, lower welfare society," the spokesperson said.
Also commenting on the impact of the living wage, Frances O'Grady, TUC general secretary, told the BBC: “The real risk here is we see employers who want to keep their labour costs low substituting in young, lower-paid workers for adult workers who they would have to pay more.”
King’s comments came as supermarket giant Sainsbury's announced it would give 137,000 of its employees a 4 per cent pay rise, which will bring wages above the average for the sector. Hourly pay at the retailer increased from £7.08 an hour to £7.36 from the end of August. The new rate will also apply to the retailer’s 40,000 workers under 25-year-olds.