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Business groups hit out at minimum wage rise

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25th Feb 2005
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Government measures to increase the minimum wage will be fiercely resisted, business groups have told AccountingWEB.

The Low Pay Commission is reported to want to increase the minimum wage (currently £4.85 per hour) to £5.05 in October, and £5.30 in 2006.

A spokesman for the Federation of Small Business (FSB) told AccountingWEB that the FSB believed the wage hike to be engineered to win votes, and that timing of the announcement, so close to the general election, was suspect.

David Bishop said, "We're concerned that the minimum wage has rised 35% over 5 years and believe that it should be adjusted in accordance with economic conditions. We suspect that government is trying to crank it up to £5 per hour by the election."

While stressing that the FSB supported a minimum wage in principle, the current rate was already having an adverse effect on FSB members in certain sectors, notably small retailers, and in some parts of the country, such as Scotland, the North-west, the South-west, and the North.

He added that the Low Pay Commission should perhaps explore the idea of regional variations in the minimum wage, although he acknowledged that such a measure could be problematic and difficult to implement.

The British Chambers of Commerce (BCC) has also condemned the news, and said that a survey of 1,200 businesses found that 80 per cent rejected the increase.

The BCC says over half the companies questioned believe that further rises will damage employment prospects and competitiveness.

David Frost, Director General of the British Chambers of Commerce said: "British businesses supported a national minimum wage but last year we saw it rise at over five times the rate of inflation ...Increases at this rate are simply not sustainable and could have a serious impact on jobs and competitiveness"

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By User deleted
25th Feb 2005 13:45

Small business, small minds?
An increase of £8 per week in 2005 and £10 per week in 2006 for those on the lowest pay in the country. Can the FSB state precisely what they believe the minimum wage should be? Slashing bureaucracy and simplifying the tax code would bring more durable and tangible benefits to SMEs whose lobbyists should focus more on. Keeping workers on the lowest legal wage is a recipe for discontent, economic stagnation and employee turnover. PR statements complaining about the minimum wage may be perceived by employees as an attack on their standards of living. As an electoral ploy, it will probably not impress the lowest paid too much, as they have been priced out of the housing market completely, and also subject to stealth taxes and generally rising prices. What will work for New Labour is the perception that they are on the side of the low paid, something that becomes an issue only when employer groups attack the minimum wage and come across as miserly in media interviews.

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Richard Murphy
By Richard Murphy
25th Feb 2005 14:42

Well said Liam
I am astonished that anyone thinks it possible to build a successful business in the UK based on paying less than £5 an hour wages. Does anyone seriously expect someone to live on about £10,000 a year now?

Business should see its job as being to raise the stakes for all, not to crush some down. Clearly on this issue the FSB is seeking to pursue an old (and I would have hoped) long forgotten Marxist agenda.

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