Miliband Pledges to Raise UK Minimum Wage to £8 an Hour
LONDON (Financial Times) - Business leaders criticized Ed Miliband’s pledge to lift the UK’s national minimum wage to £8 an hour by 2020, saying it would threaten jobs and jeopardize the independence of the commission which advises the government on low pay.
The Labor leader put the low-paid at the heart of his general election campaign, pledging at the start of his party’s annual conference to increase the minimum wage from its current level of £6.31 an hour – or £6.50 from October.
Mike Cherry, chair of the Federation of Small Business, said it was a "huge ask” for many businesses as he expressed alarm over the "politicization” of the Low Pay Commission, which sets the minimum wage at arms length from Whitehall.
"If it goes up to £8 over that period there is always a danger that it will cost jobs. No one can forecast what the economy will do over the next three to five years,” he told the Financial Times. "The important thing is that I don’t want the Low Pay Commission, which is incredibly sensible in setting credible rates, to be politicized – that is my biggest concern over this sort of statement.”
The CBI, the employers’ organization echoed Mr Cherry’s concerns as it criticized Labor’s decision to interfere with the work of the commission.
"Raising wages in this way would put serious strain on businesses, particularly hard-pressed smaller firms with tight margins, which would end up employing fewer people,” it said. "The national minimum wage has enjoyed broad business support and a move to a politicized US-style system is not in the interest of companies or workers.”
The commitment to an £8 target is particularly difficult for some employers in retail, hospitality and care sectors, where low pay is most prevalent. The British Retail Consortium issued a cool response to the proposal on Sunday, saying that "any significant rise needs to move at a pace which enables retailers to make any changes necessary to absorb costs associated with the rise.”
Wages in the UK have fallen in real terms since the last general election in 2010. The Miliband pledge of an extra £1.50 an hour is equivalent to an annual increase of 4.3 per cent, higher than the average earnings growth anticipated in coming years.
Mark Carney, governor of the Bank of England, told the TUC conference last week that he expected wage growth to surge from next summer but not to reach 4 per cent a year until 2017.
Mike Cherry, chair of the Federation of Small Business, said it was a "huge ask” for many businesses as he expressed alarm over the "politicization” of the Low Pay Commission, which sets the minimum wage at arms length from Whitehall.
"If it goes up to £8 over that period there is always a danger that it will cost jobs. No one can forecast what the economy will do over the next three to five years,” he told the Financial Times. "The important thing is that I don’t want the Low Pay Commission, which is incredibly sensible in setting credible rates, to be politicized – that is my biggest concern over this sort of statement.”
The CBI, the employers’ organization echoed Mr Cherry’s concerns as it criticized Labor’s decision to interfere with the work of the commission.
"Raising wages in this way would put serious strain on businesses, particularly hard-pressed smaller firms with tight margins, which would end up employing fewer people,” it said. "The national minimum wage has enjoyed broad business support and a move to a politicized US-style system is not in the interest of companies or workers.”
The commitment to an £8 target is particularly difficult for some employers in retail, hospitality and care sectors, where low pay is most prevalent. The British Retail Consortium issued a cool response to the proposal on Sunday, saying that "any significant rise needs to move at a pace which enables retailers to make any changes necessary to absorb costs associated with the rise.”
Wages in the UK have fallen in real terms since the last general election in 2010. The Miliband pledge of an extra £1.50 an hour is equivalent to an annual increase of 4.3 per cent, higher than the average earnings growth anticipated in coming years.
Mark Carney, governor of the Bank of England, told the TUC conference last week that he expected wage growth to surge from next summer but not to reach 4 per cent a year until 2017.