Minimum wage increase welcomed as good for economy

The planned national minimum wage increase from £5.35 to £5.52 per hour has been welcomed as a good decision for the economy, particularly retailers.

John Cridland, deputy director-general of the Confederation of British Industry (CBI), has said that the rise which will be implemented in October, has taken account of “business reality”.

More than a million workers will benefit from the increase, which was announced today by Alistair Darling, secretary of state for trade and industry. Two thirds of these will be low-paid women. Darling accepted the level recommended by the independent Low Pay Commission which also includes a rise to £4.60 from £4.45 for 18-to-21 year olds and from £3.30 to £3.40 for 16-to-17 year olds.

John Cridland, deputy director-general of CBI, said: “With interest rates and inflation rising this is not the year for unaffordable wage increases. Last week, the Chancellor made sensible decisions on public sector pay, today government has applied that same caution to private sector.

“The wage increase has exceeded average earnings growth since 2003, causing it to have a disproportionate impact in sectors such as retail and hospitality, and undermining pay and employment policies within many firms. These same businesses have faced big increases in energy and pensions costs, and, for many, this October will see an increase of four days’ paid holiday. The minimum wage has brought real benefits to many lower paid workers, but it is right that this year’s increase took account of business reality.”

The 3% increase was also welcomed by the British Retail Consortium (BRC), which had called for this year’s increase to be no more than inflation. Kevin Hawkins, director general of BRC, said: “Hard-pressed retailers have had to cope with a £2.7bn hike in wage bills caused by the previous two above-inflation increases.” He also said: “This is good news and exactly what we asked for.”

October’s changes will mean that the minimum wage has gone up by almost 30% more than inflation since its introduction in 1999.

Under new enforcement measures introduced in January, a typical penalty for underpaying a single worker is now more than £200 and employers who fail to pay the minimum wage could face prosecution.