National Minimum wage may 'harm competitiveness'

The Low Pay Commission has been told to focus on monitoring the impact of the National Minimum Wage on small firms and the employment prospects of young people in order to understand whether it is harming their competiveness.

 
The coalition government wrote to the Commission with its new requirements yesterday in a move that casts doubts over whether the measures will continue to be applied into the future. It requested that the Commission report back to the Prime Minister and the Secretary of State for Business, Innovation and Skills by the end of February 2011.
 
At the same time, however, the government also announced that it would accept the recommendations laid out in the organisation’s 2010 report for upping the National Minimum Wage (NMW) for this year.
 
The new rates, which come into effect on 1 October, will see low-paid workers aged 21 and over receive £5.93 per hour, up from £5.80. The wage for 18 to 20 year olds will rise to £4.92 per hour from £4.83, while renumeration for those aged 16 to 17 is set to increase to £3.64 per hour from £3.57.
 
For the first time, an apprenticeship minimum wage of £2.50 per hour will also be introduced for under-19 year olds and those that are aged 19 and over but in their first year of the scheme. The Commission estimates that about 970,000 people should benefit from the increases.
 
Employment relations minister Edward Davey said: “The increases to the National Minimum Wage this year are appropriate for the economic climate. They will strike a balance between helping the lowest paid, whilst at the same time not jeopardising their employment.”
 
But he added that, as small firms were disproportionately likely to employ low-paid workers, “it is right that the Low Pay Commission considers their competitiveness when they make their recommendations for next year”.
 
The Chartered Institute for Personnel and Development has previously warned that raising the NMW for younger workers could price them out of the employment market.
 
Meanwhile, the government also accepted that specific guidance should be introduced on the NMW for the entertainment sector and that Her Majesty’s Revenue and Customs should investigate whether contract and agency cleaners in the hotel sector were receiving their entitlement for the number of hours worked.
 
It likewise said it was committed to maintaining current funding in real terms for monitoring and enforcing the NMW until at least March 2014.
 
Earlier this month, London Mayor Boris Johnson also announced that the non-obligatory London Living Wage would rise by 25 pence to £7.85.