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Productivity Boost Key to Success of National Living Wage

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The need to boost productivity in low-paying sectors and among small employers will be reinforced by the introduction of the new National Living Wage (NLW) in April, though there are huge uncertainties over how businesses can achieve this. This is according to a new report on how employers expect to respond to the NLW, published today (Wednesday) by the Resolution Foundation and the CIPD, the professional body for HR and people development.

It also suggests that employers are far more likely to absorb the cost of the increase than pass it on to consumers through higher prices.

The report is based on a survey of more than 1,000 employers carried out in September 2015, which was followed by in-depth interviews.  It shows that the ways in which employers expect to respond to the NLW varies greatly between small and large employers, and across different sectors of the economy. Over half (54 per cent) of employers expect the NLW to have some impact on their labour costs.

The report highlights a welcome desire by organisations to raise productivity, with 32 percent of large employers expecting it to be part of their response. Several employers that were interviewed said it would spur them to focus more on staff output. For example, one hotel manager explained that they would focus more on training permanent staff, rather than rely on a larger pool of casual contracts.

However, there was considerable uncertainty about how to raise productivity and small firms were more pessimistic about their ability to do this.  Among organisations with less than 250 employees, the proportion expecting to absorb the cost through lower profits (26 per cent) was higher than the proportion expecting to offset costs through higher productivity (25 per cent). Many argued that improving productivity was not viable, with one business summarising concerns by saying, “we’ve done all this before. I don’t think I can get any more out of them [staff] again”.

Encouragingly, there was little appetite for reducing staff levels – just 10 per cent of small firms considered this as an option, rising to 17 per cent of larger organisations. Several employers argued that reducing staff levels or raising prices would hit the competitiveness of the firm, with one hotel owner stating, “if you start cutting staff…that could impact on the guest experience”.

Hiring younger workers because they aren’t entitled to the National Living Wage wasn’t considered a viable long-term plan either. As one employer explained,“because of the need for experienced staff, it would be difficult to employ more people aged 25 and under”.

However, the report suggests there could be an impact on the pay of staff paid above the NLW.  While just nine per cent of employers said they planned to give employees a lower basic pay rise to help pay for the NLW, almost half of employers hadn’t yet decided what to do in order to pay for the NLW.

The challenge for employers is meeting the cost while preserving incentives for career progression and rewarding extra responsibility. One employer highlighted how increases in the National Minimum Wage (NMW) had completely eroded pay differentials saying, “now our wage structure is not so much a structure, it’s more of a wage.”

Several employers raised doubts about how widespread compliance will be. One childcare director argued that there are a high number of workers in the sector who are already being paid below the NMW.

The report makes a number of recommendations to support the successful implementation of the National Living Wage, including:

–        Providing information, advice and assistance to firms in low-paying sectors who are looking to raise their productivity, particularly SMEs

–        Focusing on progression, for example by ensuring Universal Credit helps low-paid workers into better-paying positions

–        Ensuring that enforcement efforts are sufficient to tackle concerns about compliance

–        Making the implementation of the NLW a focus of new, devolved economic leadership

–        Aligning the timing of the annual uprating announcements of the National Living Wage and the National Minimum Wage to the same month each year

The National Living Wage – the new legal wage floor for workers aged 25 and over, which comes into effect on 6 April – is set to benefit around 4.5 million employees, rising to 6 million in 2020.

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

“The National Living Wage will make a huge difference to millions of low-paid staff. The higher wage floor should spur productivity gains, and encouragingly employers seem keen to respond in this way. How these efficiencies are found remains unclear however, particularly among SMEs.

“The introduction of the National Living Wage will be a big bang for low-paid staff. But it will be more of a slow burner for businesses, with many waiting to see how sectors respond over the coming years. This presents a crucial window of opportunity for government to work with business to share best practice, understand the support they need, and consider how productivity can be improved in low paying sectors.

Mark Beatson, Chief Economist at the CIPD, said:

“With just over a month to go until the introduction of the National Living Wage, most employers likely to be affected will be concentrating on the practical steps necessary to ensure they implement the new wage on time.  But our reports suggest there is a lot more uncertainty among employers on how they are going to make sure this step up in pay isn’t one that threatens jobs or the business.

“Large employers appear to have more options available to them when deciding how to respond.  Small and medium sized businesses are more likely to absorb the cost through lower profits, at least in the short term.  Many employers say they intend to manage the cost through increased productivity, but our case studies suggest we may often find a gap between good intentions and reality, due to a lack of knowledge about how productivity can be improved and other pressures on management which mean they never quite get round to changing the way the business operates.

“Government must continue to improve awareness of the NLW by engaging with employers, but this needs to extend beyond help on compliance.  Small firms will need extra help and advice on how they can manage the process, with clear signposting to sources of practical support.

“Universal Credit could help the economy sustain a higher minimum wage if it can deliver practical and focused support for claimants in low-paid work that helps them improve their skills and develops their potential for higher-paid work.  Our concern is that implementation will in the end be driven by pressure for short-term reductions in the welfare bill, with employees encouraged to work more hours for low pay rather than the same hours at a higher pay rate.”

Employer responses to the NLW by firm size

Economy

New Zealand to Switch to Fully Renewable Energy by 2035

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Shutterstock Licensed Photo - By Eviart / https://www.shutterstock.com/g/adrian825

New Zealand’s prime minister-elect Jacinda Ardern is already taking steps towards reducing the country’s carbon footprint. She signed a coalition deal with NZ First in October, aiming to generate 100% of the country’s energy from renewable sources by 2035.

New Zealand is already one of the greenest countries in the world, sourcing over 80% of its energy for its 4.7 million people from renewable resources like hydroelectric, geothermal and wind. The majority of its electricity comes from hydro-power, which generated 60% of the country’s energy in 2016. Last winter, renewable generation peaked at 93%.

Now, Ardern is taking on the challenge of eliminating New Zealand’s remaining use of fossil fuels. One of the biggest obstacles will be filling in the gap left by hydropower sources during dry conditions. When lake levels drop, the country relies on gas and coal to provide energy. Eliminating fossil fuels will require finding an alternative source to avoid spikes in energy costs during droughts.

Business NZ’s executive director John Carnegie told Bloomberg he believes Ardern needs to balance her goals with affordability, stating, “It’s completely appropriate to have a focus on reducing carbon emissions, but there needs to be an open and transparent public conversation about the policies and how they are delivered.”

The coalition deal outlined a few steps towards achieving this, including investing more in solar, which currently only provides 0.1% of the country’s energy. Ardern’s plans also include switching the electricity grid to renewable energy, investing more funds into rail transport, and switching all government vehicles to green fuel within a decade.

Zero net emissions by 2050

Beyond powering the country’s electricity grid with 100% green energy, Ardern also wants to reach zero net emissions by 2050. This ambitious goal is very much in line with her focus on climate change throughout the course of her campaign. Environmental issues were one of her top priorities from the start, which increased her appeal with young voters and helped her become one of the youngest world leaders at only 37.

Reaching zero net emissions would require overcoming challenging issues like eliminating fossil fuels in vehicles. Ardern hasn’t outlined a plan for reaching this goal, but has suggested creating an independent commission to aid in the transition to a lower carbon economy.

She also set a goal of doubling the number of trees the country plants per year to 100 million, a goal she says is “absolutely achievable” using land that is marginal for farming animals.

Greenpeace New Zealand climate and energy campaigner Amanda Larsson believes that phasing out fossil fuels should be a priority for the new prime minister. She says that in order to reach zero net emissions, Ardern “must prioritize closing down coal, putting a moratorium on new fossil fuel plants, building more wind infrastructure, and opening the playing field for household and community solar.”

A worldwide shift to renewable energy

Addressing climate change is becoming more of a priority around the world and many governments are assessing how they can reduce their reliance on fossil fuels and switch to environmentally-friendly energy sources. Sustainable energy is becoming an increasingly profitable industry, giving companies more of an incentive to invest.

Ardern isn’t alone in her climate concerns, as other prominent world leaders like Justin Trudeau and Emmanuel Macron have made renewable energy a focus of their campaigns. She isn’t the first to set ambitious goals, either. Sweden and Norway share New Zealand’s goal of net zero emissions by 2045 and 2030, respectively.

Scotland already sources more than half of its electricity from renewable sources and aims to fully transition by 2020, while France announced plans in September to stop fossil fuel production by 2040. This would make it the first country to do so, and the first to end the sale of gasoline and diesel vehicles.

Many parts of the world still rely heavily on coal, but if these countries are successful in phasing out fossil fuels and transitioning to renewable resources, it could serve as a turning point. As other world leaders see that switching to sustainable energy is possible – and profitable – it could be the start of a worldwide shift towards environmentally-friendly energy.

Sources: https://www.bloomberg.com/news/articles/2017-11-06/green-dream-risks-energy-security-as-kiwis-aim-for-zero-carbon

https://www.reuters.com/article/us-france-hydrocarbons/france-plans-to-end-oil-and-gas-production-by-2040-idUSKCN1BH1AQ

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5 Easy Things You Can Do to Make Your Home More Sustainable

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Shutterstock Licensed Photot - By Diyana Dimitrova

Increasing your home’s energy efficiency is one of the smartest moves you can make as a homeowner. It will lower your bills, increase the resale value of your property, and help minimize our planet’s fast-approaching climate crisis. While major home retrofits can seem daunting, there are plenty of quick and cost-effective ways to start reducing your carbon footprint today. Here are five easy projects to make your home more sustainable.

1. Weather stripping

If you’re looking to make your home more energy efficient, an energy audit is a highly recommended first step. This will reveal where your home is lacking in regards to sustainability suggests the best plan of attack.

Some form of weather stripping is nearly always advised because it is so easy and inexpensive yet can yield such transformative results. The audit will provide information about air leaks which you can couple with your own knowledge of your home’s ventilation needs to develop a strategic plan.

Make sure you choose the appropriate type of weather stripping for each location in your home. Areas that receive a lot of wear and tear, like popular doorways, are best served by slightly more expensive vinyl or metal options. Immobile cracks or infrequently opened windows can be treated with inexpensive foams or caulking. Depending on the age and quality of your home, the resulting energy savings can be as much as 20 percent.

2. Programmable thermostats

Programmable thermostats

Shutterstock Licensed Photo – By Olivier Le Moal

Programmable thermostats have tremendous potential to save money and minimize unnecessary energy usage. About 45 percent of a home’s energy is earmarked for heating and cooling needs with a large fraction of that wasted on unoccupied spaces. Programmable thermostats can automatically lower the heat overnight or shut off the air conditioning when you go to work.

Every degree Fahrenheit you lower the thermostat equates to 1 percent less energy use, which amounts to considerable savings over the course of a year. When used correctly, programmable thermostats reduce heating and cooling bills by 10 to 30 percent. Of course, the same result can be achieved by manually adjusting your thermostats to coincide with your activities, just make sure you remember to do it!

3. Low-flow water hardware

With the current focus on carbon emissions and climate change, we typically equate environmental stability to lower energy use, but fresh water shortage is an equal threat. Installing low-flow hardware for toilets and showers, particularly in drought prone areas, is an inexpensive and easy way to cut water consumption by 50 percent and save as much as $145 per year.

Older toilets use up to 6 gallons of water per flush, the equivalent of an astounding 20.1 gallons per person each day. This makes them the biggest consumer of indoor water. New low-flow toilets are standardized at 1.6 gallons per flush and can save more than 20,000 gallons a year in a 4-member household.

Similarly, low-flow shower heads can decrease water consumption by 40 percent or more while also lowering water heating bills and reducing CO2 emissions. Unlike early versions, new low-flow models are equipped with excellent pressure technology so your shower will be no less satisfying.

4. Energy efficient light bulbs

An average household dedicates about 5 percent of its energy use to lighting, but this value is dropping thanks to new lighting technology. Incandescent bulbs are quickly becoming a thing of the past. These inefficient light sources give off 90 percent of their energy as heat which is not only impractical from a lighting standpoint, but also raises energy bills even further during hot weather.

New LED and compact fluorescent options are far more efficient and longer lasting. Though the upfront costs are higher, the long term environmental and financial benefits are well worth it. Energy efficient light bulbs use as much as 80 percent less energy than traditional incandescent and last 3 to 25 times longer producing savings of about $6 per year per bulb.

5. Installing solar panels

Adding solar panels may not be the easiest, or least expensive, sustainability upgrade for your home, but it will certainly have the greatest impact on both your energy bills and your environmental footprint. Installing solar panels can run about $15,000 – $20,000 upfront, though a number of government incentives are bringing these numbers down. Alternatively, panels can also be leased for a much lower initial investment.

Once operational, a solar system saves about $600 per year over the course of its 25 to 30-year lifespan, and this figure will grow as energy prices rise. Solar installations require little to no maintenance and increase the value of your home.

From an environmental standpoint, the average five-kilowatt residential system can reduce household CO2 emissions by 15,000 pounds every year. Using your solar system to power an electric vehicle is the ultimate sustainable solution serving to reduce total CO2 emissions by as much as 70%!

These days, being environmentally responsible is the hallmark of a good global citizen and it need not require major sacrifices in regards to your lifestyle or your wallet. In fact, increasing your home’s sustainability is apt to make your residence more livable and save you money in the long run. The five projects listed here are just a few of the easy ways to reduce both your environmental footprint and your energy bills. So, give one or more of them a try; with a small budget and a little know-how, there is no reason you can’t start today.

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