The Minimum Wage: the CBI misses the point
In response to the TUC’s call today for the minimum wage to rise from its current level of £5.73 to £6.10 per hour, the CBI issued a press release stating:
We need to be very careful in the current climate to ensure that well-meaning calls for substantial rises in the minimum wage do not lead to increases in unemployment.
I guess its progress of a sort that the CBI describes us as “well-meaning” – that’s a lot nicer than some of the things we’ve been called in the past. And I’m used now to being patronised by those business associations that know so much more than anyone else about what’s good for the UK economy (lots of financial deregulation, for example). But, as we explained to the Low Pay Commission (LPC) in our evidence session today, our call is not some misguided attempt to raise wages at the expense of employment.
The point is that the LPC is setting a wage that will not come into force until October 2009. By that time most independent forecasts expect the UK to be tentatively starting to grow again after five quarters of recession. The worst thing the LPC could do is set an unnecessarily low minimum wage which will choke off demand in local economies just when things are looking a little brighter. Business always tells the LPC that if the minimum wage is set too high, jobs will be lost. We were pointing out, that the same would be true if it is set too low. The rate we suggest would put an extra £686 million in the pockets of minimum wage earners who will spend a fair portion of that cash in sectors such as retail and hospitality which will find next year tough going and would welcome a little more consumer confidence.
In fact, the Press Association reported very clearly that this was our argument but the CBI chose to ignore that. Strange that the CBI demands economic stimulus from the taxpayer (it wanted £9 billion worth of cuts in employers’national insurance in the Pre-Budget Report!) but dismisses it when a relatively small sum has to come out of their members’ own pockets.