National minimum wage rise leads to disagreement over impact on jobs

Employment experts have clashed over whether the rise in the national minimum wage (NMW) will put firms off creating jobs.

The Budget 2010 confirmed that the hourly rate for adults will go up by 2.2%, from £5.80 to £5.93, from 1 October 2010. The minimum wage for 18- to 20-year-olds will increase by 1.9% to £4.92 per hour, while apprentices aged 16 and 17 will see hourly rates increase by 2% from £357 to £3.64.

But Charles Cotton, reward adviser at the Chartered Institute of Personnel and Development, said: “It is difficult to see how this increase will help create jobs or offer a boost in training places for unemployed young people. In particular, combining a higher minimum wage with the impending hike in employers’ national insurance contributions really would represent a hefty ‘tax on jobs’.

“Pricing young people out of work, while also using taxpayers’ money to subsidise a youth jobs guarantee, doesn’t make sense. We’d have hoped for a more joined-up approach.”

However, Peter Reilly, director, HR research and consultancy, at the Institute for Employment Studies, told Personnel Today there was little hard evidence that increasing pay for the lowest-paid workers put employers off hiring staff. He said: “There has never been any evidence that the NMW will cost jobs.”

However, he added the decision to increase the NMW could complicate organisations’ pay reviews for the coming financial year.

“Employers may find it difficult to increase reward for the lowest-paid workers without also bumping up the pay of those earning just above the minimum wage.

“The risk is there’s a concertina effect, where organisations find it harder to justify pay restraint further up the pay scale.”

Meanwhile, the TUC welcomed the NMW rise.

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