THE GUARDIAN

 

  
£5 an hour minimum wage would not cost jobs, says pay expert

Ashley Seager
Monday September 27, 2004

The minimum wage, which this week rises almost 8% to £4.85 an hour, is having an ever greater impact on firms but has not led to any job losses, according to a study which has sparked a row between business and the unions.

Pay specialist Incomes Data Services says while the minimum wage has risen at an average of 7% a year since its launch in 1999 if anything there has been an increase in employment in traditional low-wage sectors such as retailing and hospitality.

While the economy has been growing steadily for years, pushing total employment to record highs, average pay across the economy has risen 3% a year, less than half the rises in the minimum wage.

Alistair Hatchett, head of pay services at IDS, said it was possible the minimum wage could rise further without any negative impact on jobs. "Many firms have already moved their lowest rates to £5 an hour, so there is clearly room for the minimum wage to rise to at least this level in 2005."

Many low-pay firms had made significant changes to their behaviour as a result of the minimum wage, such as moving their earnings reviews to October and adjusting pay differentials, he said.

"The increases in the minimum wage - outstripping the rise in average earnings - have forced employers to rethink their grade structures and to introduce new ways of working. Some have moved towards team working, with most staff on a single spot rate."

The TUC seized on the survey's findings as proof the minimum wage was working and accused employers' group the CBI of "crying wolf" by warnings that increasing its level would cost jobs.

"The minimum wage is doing the business. It helps about a million people every time it goes up, most of them part-time women workers, and jobs have been gained, not lost," said TUC chief Brendan Barber.

"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."

The CBI's director of human resources policy, Susan Anderson, said: "Nobody should be complacent about increases in the minimum wage. We cannot afford to go on forever giving people increases well above rises in average earnings.

"The wage is now on the radar for big businesses as well as small. Business will not oppose rises that can be justified. But the TUC and IDS are clearly jumping the gun by suggesting they know a figure above £5 will be OK."