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Minimum Wage: What Are The True Costs?


A spat has broken out between the British Retail Consortium (BRC) and the TUC over the true costs of the National Minimum Wage.

It started when the BRC produced a report saying 78,000 jobs in the retail sector had been lost due to the extra £1.2 billion minimum wage costs had placed on retailers’ wage bills.

The BRC also warned that this year’s increase would add a further £1.5 billion to wage costs – with the implication that further jobs would have to go.

It had based the figures on responses to its 2006 National Minimum Wage (NMW) Survey, which it describes as the most comprehensive assessment of the NMW’s impact by any business sector.

The BRC argued that the findings provided clear evidence that the NMW is at ‘tipping’ point and called on Paul Myners, the new chairman of the Low Pay Commission (LPC) to carry out a fundamental reassessment of the NMW and define its long-term goal.

But it said the most immediate necessity is a two-year moratorium on any further increases above inflation.

BRC Director General Kevin Hawkins said: “Retailers tell us they are being expected to find £2.7 billion extra for wages over just two years.

“With other costs, including energy prices, rent, rates and service charges shooting up, it’s no surprise so many retailers are cutting staffing costs by employing fewer people.

”There should be no above-inflation increase for the next two years to give retailers the chance to absorb the six per cent award due on 1 October, on top of all the previous increases, and to allow the Low Pay Commission to carry out a fundamental review. It has the freedom to look well beyond the size of the increase due in October 2007.

“Our members need guidance on where the commission is heading. What is its target relationship between the minimum wage and average earnings or basic wages? How does it propose to get there? And over what timescale?”

But the TUC poured scorn on the BRC’s warning – and its figures. TUC general secretary Brendan Barber said: “Every time they are asked members of the British Retail Consortium predict that an increase in the minimum wage will cause massive job losses and every time they are proven wrong.

“The Low Pay Commission should ignore the inaccurate misfortune telling of employer surveys and focus on the facts.

“Official figures show that although retail employment dipped slightly this year as consumers cut back on spending to clear debts, over the last two years 23,000 new jobs were created in retail. And in terms of setting a future minimum wage the latest figures show a healthy growth in sales.”

The TUC admitted the retail sector had been suffering – but said this was due to a pause in spending. In the five years preceding the downturn the value of retail sales had increased by 6 per cent per year, while average earnings had increased by 4.4 per cent – a situation that was not sustainable but had nothing to do with the NMW.

In addition, the TUC says the BRC’s survey overstates the number of jobs lost. Official figures suggest a fall of 20,000 jobs in the retail sector in the year to spring 2006 – but there had been a 43,000 increase during the previous year.

The TUC maintains that the real clue to future employment prospects in the retail sector is not the NMW but sales growth – and the Office of National Statistics reports that underlying growth remains ‘robust’.


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