The regular increases to the minimum wage have hindered employers’ chances of recognising and rewarding new skills in the workforce, making the government skills pledge hard to achieve, according to the British Retail Consortium (BRC).
A study for the BRC carried out by Oxford University has found that as the minimum wage has grown faster than average earnings and productivity, many employers, particularly those that operate in fiercely competitive markets such as retail, have seen their pay structures compressed.
The BRC said that while it welcomed the government’s skills pledge to improve the skills base of the UK economy, the rapid growth in the national minimum wage was having the opposite effect.
The report said: “If the minimum wage continues to grow at its recent average rate, employment will fall and employers will find themselves unable to reward skills, preserve wage differentials and provide valued non-wage benefits.”
The national minimum wage has been in operation since 1999 and has grown by more than 45% in that time, compared with just 31% growth in productivity.
The BRC wants to see the purpose of the minimum wage and the methodology used to increase it annually reviewed.
The report continued: “The current system where the national minimum wage increase is announced in March for implementation the following October means that employers whose financial years operate April to March have less than a month to set budgets for the coming financial year in which the new rate will take effect.
“As a result, many have resorted to freezing headcounts and pay increases as they wait to hear what the forthcoming wage increase will be and assess whether they can absorb it without making offsetting cost reductions.”