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Big rises in minimum wage will hit business - fears CBI
October 2006
Further inflation-busting increases in the minimum wage would damage business and boost the black economy, the biggest employers’ organisation has warned.
The CBI yesterday called for a “modest rise” in the minimum pay rate next year following next month’s 30p increase from £5.05 to £5.35 per hour.
The minimum wage introduced at £3.60 in 1999 has risen by 27% since 2002, easily exceeding rises in average wages over the same period. In a submission to the Low Pay Commission the CBI said that many companies suffering from increased energy costs and employment regulation, would not be able to afford further big rises in minimum pay rates.
Companies operating in the retail, hospitality and food production sectors were already struggling to meet the demands of the minimum wage. Many employers as a consequence had been forced to reduce staff hours and plan for job losses.
Susan Anderson, CBI director of Human resources policy said “The minimum was has improved living standards for many workers but continuing heavy annual increases are simply not sustainable. Firms are already under great pressure from rising energy costs, lower waged competition overseas and an uncertain global economic outlook”
Brendan Barber, TUC general secretary, noted that the CBI had scrapped its previous call for the minimum wage to be frozen.
He said “British business has comfortably been paying a growing minimum wage and, given the positive economic outlook for the next two years, a minimum wage of over £6 per hour by 2008 should be easily affordable. “
The British Retail Consortium warned last week that the latest 30p rise in the minimum wage rate to £5.35 next month would add £1.5bn to retailers costs over the next 12 months. It called for a two-year moratorium on any further increases above inflation to minimum rates.
However the TUC said “Every time they are asked, members of the BRC predict that an increase in the minimum wage will cause massive job losses – and every time they are proven wrong “.
Financial Times – October 2006
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