Why did the rise in minimum wage last week anger the BRC and so many retailers, and is there anything that could soften the blow of future increases?
What is the change in minimum wage?
As announced on Budget day last week, the minimum wage will increase 2.2% from £5.80 an hour to £5.93 for workers aged 21 and over in October 2010.
How has it changed previously?
The 13p increase stands in comparison with the 7p rise from £5.73 to £5.80 an hour last year, which was applicable to workers aged 22 and over.
British Retail Consortium director- general Stephen Robertson said: “How can an increase virtually double last year’s be justified? Economic conditions were far weaker in the run-up to this year’s decision than 12 months earlier.”
How will the change affect retailers?
“The rise will benefit about 1 million people and will mean an extra £5.20 in the wage packet of a 40-hour-per-week worker on the minimum wage,” said Trades Union Congress general secretary Brendan Barber.
Robertson said: “The increase is downright irresponsible. It is at odds with Government promises of prudence and public sector freezes and will damage retailers’ ability to maintain and create jobs.”
A BRC spokesperson added: “Retailers have a certain budget allocated for staff costs. The increase in staff costs caused by the increase in minimum wage may affect areas like staff training, benefits and future employment.” He added that the change when enforced will put pressure on retailers, but it is too early to say whether it will lead to job cuts.
What is being done for retailers?
The BRC had been campaigning for a minimal rise in the range of 0% to 1% to reflect economic realities. It said this would be more reflective of national average earnings, which convey what is going on in the whole economy. In the year to January 2010, average private sector pay fell 0.7% while for all employees, it rose only 1%.
Once the economy returns to stability, the BRC will ask the Low Pay Commission (LPC) to establish a more predictable relationship between minimum wage and average earnings, while making sure the minimum wage does not increase faster than average earnings. This will provide a more long-term outlook for the minimum wage than the current six months in which retailers have to prepare for the change, giving them more certainty about the direction of future costs.
The BRC is also asking the LPC for a two-year projection of what the minimum wage will be, giving retailers more time to prepare for change.
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