Member Article

Minimum wage proposals becoming a 'political football' according to business leaders

There has been a mixed reaction amongst business leaders over Ed Miliband’s proposals to raise minimum wage to £8 if Labour win the General Election next year.

The Labour leader told the Sunday Mirror: “Too often people think that politics doesn’t care about them.

“They are the wealth creators just as much as the top entrepreneurs and the top business people. And we’ve got to reward them.”

The increase would reportedly affect around 1.4 million jobs. The rate is recommended by the Low Pay Commission, which is overseen by Liberal Democrat Business Secretary Vince Cable.

The Conservatives say they will already be delivering an above-inflation increase as, from October, the minimum wage will rise from £6.31 to £6.50.

The minimum wage for adult workers was £5.80 at the time of the last election, and the TUC earlier this month called for a rise to £10.

However not all organisations have agreed with the proposals, fearing the effect on job creation, as well as the expense to small businesses and unaffordability in the public sector.

Katja Hall, CBI deputy director-general, said: “The minimum wage is set at the highest rate it can be without putting job creation at risk at the moment. It has risen more than average earnings throughout the recession and recovery and is set to increase by more than 3% from October.

“The Low Pay Commission is one of the biggest success stories of the last Labour Government and makes its judgements based on considerable independent expertise. The LPC is not for politicians to play politics with.

“The national minimum wage has enjoyed broad business support and a move to a politicised US-style system is not in the interest of companies or workers. “Raising wages in this way would put serious strain on businesses, particularly hard-pressed smaller firms with tight margins, which would end up employing fewer people.

“Instead, politicians should address how people move on in their careers, through training and better skills, helping them move to higher paying roles over time.”

John Allan, national chairman, Federation of Small Businesses, said: “The FSB has always supported the National Minimum Wage but we are increasingly concerned that it’s becoming a political football.

“Our concern is that setting rates according to political need means that the impact of rises on employment, inflation and growth will not be fully explored.

“Sectors such as retail and social care are run on very fine margins, and will struggle with substantial increases to the minimum wage rate that fail to take wider economic conditions into account.”

“The FSB therefore believes the rate should continue to be based on an independent LPC’s recommendations, and that future rates should be determined following careful consultation with the Office for Budget Responsibility, business groups and workers representatives to ensure the decision takes into account the full economic picture.”

TUC General Secretary Frances O’Grady said: “Raising the minimum wage and putting more money into the hands of low-paid workers won’t just be welcomed by hard-pressed families, it will also be good news for local economies who will benefit from a boost in workers’ spending power.

“The predictable scaremongering from business about the impact of a rising minimum wage on jobs should be ignored. They said the same in the 1990s before the minimum wage was introduced. They were wrong then and they are wrong again now.

“After years of falling real pay we need a range of policies to ensure fairer pay from board level to the shop floor. The TUC believes Britain needs a pay rise - only then will the recovery start to feel real for people in work.

“That is why workers and their families from all across the country will be coming to London next month to join the TUC’s march and rally on 18 October to call for fairer pay.”

This was posted in Bdaily's Members' News section by Clare Burnett .