As the National Living Wage increased again on the April 1, the response from all sides was familiar.

Ministers make the announcement saying that work should pay, campaigners welcome the increase but insist it still does not match the real cost of living and employers warn that they are being squeezed from every direction.

These can all be true at the same time. The pressure on workers is obvious as households have seen the cost of food, rent, childcare, heating and transport all increase in recent years with constant talk of a “cost of living crisis”.

For businesses, particularly in sectors such as hospitality, retail and care, there is equal pressure.

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Many are working in narrow margin industries and are trying to stay viable while paying more for staff, stock and premises.

This policy also raises politically interesting points for Stormont. In addition to the question of whether the wage floor should rise, there is the separate issue of whether the Executive should have the power to set the rate itself.

An initial response would be that this sounds like common sense.

The North has its own labour market, its own economic structure and its own political institutions. Why should such an important lever be fixed in Westminster, when so many of the consequences are felt locally?

The appeal is obvious, devolving minimum wage powers sounds practical and it speaks to a broader instinct that decisions affecting local workers and local firms should not be designed through a London lens.

However, the decision is more complex than many recognise because the living wage bites harder here than anywhere else in the UK.

As wages are lower here than across the water, the same UK-wide minimum wage has a stronger impact.

The living wage is equivalent to over 75% of Northern Ireland’s median hourly wage, compared with around 68% across the UK. In simple terms, the statutory minimum is already relatively higher here.

As a result, more workers are on the minimum wage and more firms feel each increase. It means whole sectors are more exposed, particularly hospitality, retail, social care and lower-paid administrative work.

These are major parts of the economy, they are important pathways into employment and in many towns, they are the local economic backbone.

Therefore, if Stormont had the ability to set its own rate, what would it do with that power?

Would it set a higher minimum wage than the rest of the UK? That would be popular in some quarters, and the case for the move would point to the stubbornly high levels of low pay and the number of jobs with limited progression pathways.

A stronger wage floor would also be consistent with the drive for good jobs, fairness and making work pay.

However, there would be costs and they would not fall evenly. A higher wage floor would hit hardest in precisely those sectors where wage pressures are already most intense.

It would be welcomed by employees, but it would also test the business models of firms operating on tight margins.

In some cases firms might absorb the cost, but in most instances firms would be forced to respond in other ways including raising prices, cutting hours and reducing recruitment for staff the policy is meant to support.

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The impact may be even greater for younger workers. The Labour Government’s April 2025 changes delivered a large rise in the 18-20 minimum wage rate, while the higher employer National Insurance rate increased cost pressures across many of the sectors where younger people tend to get their first job.

The danger is not that every employer suddenly stops recruiting, but that entry-level opportunities in areas such as hospitality and retail begin to reduce. This is not a trivial risk.

In addition, changes to the minimum wage does not only affect those at the very bottom of the pay scale, it also shapes the wage structure above it.

Employers need to preserve some reward for responsibility and specialist skills. If they did not, wage compression would reduce incentives for employees to progress.

Therefore, if not a higher minimum wage, could Stormont use devolved powers to set a lower minimum wage?

Economically that argument would not be absurd and could potentially create more employment opportunities, but politically it would be a non-starter.

No Executive would choose headlines stating it had chosen to make local workers less well off.

As with many calls for policy devolution to Stormont, asking for the power is much easier than using it.

Once Stormont owns the lever, it owns every trade-off. Every increase becomes an argument about business costs and every cautious decision becomes a controversy about fairness.

A higher wage floor can reduce low hourly pay, improve earnings for some workers and narrow pay inequality at the bottom.

But it cannot solve Northern Ireland’s bigger labour market weaknesses, it does not fix economic inactivity, it does not guarantee more hours for people in insecure work and it does not raise productivity.

Using the policy measures we already control, such as skills development and infrastructure investment, should be the focus for any Executive which prioritises economic growth.

© The Irish News