Minimum wage 'not costing jobs'

29-09-2004

The national minimum wage is having a wider impact on wages than was foreseen when it was introduced in 1999, but has not cost jobs, a report says.

The hourly rate increases from �4.50 to �4.85 on Friday, and is setting the pay agenda for a range of jobs, according to Incomes Data Services (IDS).

It says wages for clerical workers, as well as in traditional low-pay sectors, have also risen since its introduction.

The CBI has warned that the increase in minimum pay is a worry for business.

The CBI said a survey of 520 companies found that a quarter of them thought 1 October's rise would have a "significant" effect on their costs.

Larger firms expect the most damaging impact, the employers' group warned, with some saying jobs or hours would be cut to offset the cost.

New grades

But the IDS report said employment was continuing to grow in retail, catering and leisure, where the statutory rate had a big influence on wages.

The salaries of clerical workers, ranging from banking staff to civil servants, have also been improved by the minimum wage, it said.

"The increase in the minimum wage, outstripping the rise in average earnings, has forced employers to rethink their grade structures and to introduce new ways of working." said IDS' head of pay services Alastair Hatchett.

Some companies are moving their pay review dates to October to coincide with increases in the minimum wage, said the report.

And it pointed out many firms had already increased their minimum hourly rate to �5, but said there was still no evidence that increasing the rate had cost jobs.

Part-time workers

The minimum wage for workers aged between 18 and 21 will rise from �3.80 an hour to �4.10 on Friday and a new �3-an-hour rate will come into force for 16 and 17-year-olds.

"The minimum wage is doing the business," said Brendan Barber, TUC General Secretary.

"It helps around a million people every time it goes up, most of them part-time women workers, and jobs have been gained not lost.

"But the CBI seems to be stuck in a minimum wage groundhog day. Every time it increases they cry wolf on job losses.

"It's time they accepted that the wage works and instead concentrated on helping the government and trade unions crack down on employers who are still not paying staff the legal minimum."

'Additional pressure'

But the Forum of Private Business' chief executive, Nick Goulding, called the increase "a shameless piece of electioneering".

"This increase has been badly thought through and will have a variety of negative effects," he said.

"It will hit businesses in poorer and remote areas harder and it will take cash straight out of employers' pockets, since their profits are only going up with inflation.

"Above all it is an unwelcome additional pressure on businesses already being stung with a range of higher costs including increased employers' National Insurance contributions and rocketing levels of insurance premiums."

Mr Goulding said the increase would have a heavy impact on high employment sectors such as retail, hotels, restaurants, cleaning, security, social care, hairdressing and textile manufacturing.

BBC News

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