Increases in the minimum wage should not be decided by political considerations, according to the Chartered Institute of Personnel and Development (CIPD).
The CIPD has warned that the government must take into account the tight labour market as well as possible future restrictions on the supply of migrant labour which could exacerbate the impact on employers of increases in the minimum wage.
Charles Cotton, reward adviser at the CIPD, said that, up to now, the effects of the minimum wage on profits and jobs in low-paid service sectors have been offset by strong consumer demand.
“With consumer demand expected to ease this year and next, a higher minimum wage could have a bigger impact on profitability, with possible consequences for jobs in these sectors,” he said.
“The pre-election debate on immigration suggests tighter controls are inevitable. Future increases in the minimum wage will need to take into account the possibility that employers will be finding it more difficult to hire low-skilled migrant workers.
“This restriction on supply at the lower end of the pay scales could reinforce the impact of minimum wages as employers compete for the increasingly scarce resource of lower paid labour,” Cotton said.
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