7p rise in minimum wage will hit jobs, employers’ groups warn

Business groups are disappointed that the UK minimum wage will increase by 7p to £5.80 per hour from October, claiming the move will put many more jobs at risk.

Business secretary Peter Mandelson announced this morning that the government had accepted the Low Pay Commission’s recommendation that the adult rate of the national minimum wage (NMW) should increase by 7p this year.

But the Chartered Institute of Personnel and Development (CIPD) warned the move would increase the risk of job losses in low-paid sectors.

Charles Cotton, reward adviser at the HR body, argued that it was vital that the preservation of  jobs took priority over pay increases during a recession.

He said: “We have advised a freeze on the minimum wage in light of the recession, particularly following the 21p increase in 2008, on the grounds that keeping people in work and maximising job opportunities must be a priority.

“While we support the Low Pay Commission, we are concerned that this decision will increase the risk of job losses in low-paid sectors. This should have been avoided at a time when deflation on the Retail Price Index measure of inflation will limit the impact of a National Minimum Wage freeze on people’s real living standards.

Cotton claimed the money put aside for raising the minimum wage should go towards a targeted job-creation programme for young people and the long-term unemployed.

David Frost, director-general of the British Chambers of Commerce, said a rise, even as little as 7p, was unhelpful. “[The decision] shows that the Low Pay Commission and the government have largely understood the seriousness of the situation, but a freeze in the NMW would have been more help to business,” he said.

However, John Cridland, deputy director-general of the CBI, said the decision to raise the NMW was sensible and that the rise would not be high enough to force employers to make more job cuts.

He said: “The inflation-busting rise some unions had called for would have hit firms hard and put many lower paid workers on the dole.”

Yet Dave Prentis, general secretary of union Unison, claimed the rise was too low to make a difference to employees, even in low-paid sectors.

“We believe that the minimum wage should be higher – an extra 7p an hour won’t go far to help pay the rising costs of essential items such as food, fuel and housing,” he said.

The rate for 18- to 21-year-olds will also increase, by 6p to £4.83, and for 16- and 17-year-olds will go up by 4p to £3.57: 21-year-olds can expect to receive the full adult minimum wage from October 2010, the Department for Business added.

Mandelson said: “The Low Pay Commission has carefully examined the latest economic data before making its recommendations on the minimum wage rate, balancing the needs of workers and businesses in the current economic climate.

“The government agrees with this assessment and has accepted the recommendations for these new rates to take effect in October.”

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