National Minimum Wage increase could spell job losses

Above-earnings increases to the UK’s National Minimum Wage (NMW) mean that some firms may have to reduce staff hours and benefits to remain competitive, with job losses increasingly likely, the Confederation of British Industry (CBI) has warned.

In its submission to the Low Pay Commission, which sets NMW rates, the CBI argued that the wage’s increasing coverage of the labour market has achieved its aim of establishing a ‘floor’ for lower paid workers.

But the employers group said that the cumulative impact on firms of increased wage costs and new employment rights must be taken into account.

With last week’s increase to £5.52, the NMW has risen by 53% since its introduction in 1999 – significantly outstripping average earnings growth of 38.8%. The CBI claims the minimum wage has risen faster than in any other OECD area – 30 countries worldwide – and is calling for only a modest increase in 2008.

John Cridland, the CBI’s deputy director-general, said: “This year’s increase makes our minimum wage the third highest in the world.

“The era of continually increasing the numbers of employees covered by the wage should now come to an end – the Low Pay Commission itself acknowledges the present situation requires a more cautious approach.

“Firms now have less financial headroom to reward good performance and incentivise staff to take on new responsibilities or participate in training.”

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