BCC argues businesses unable to afford any increase in National Minimum Wage next year

The British Chambers of Commerce (BCC) is urging the Low Pay Commission to recommend maintaining the National Minimum Wage (NMW) at its current level next year and until economic conditions have significantly improved.

The BCC has calculated that another increase in NMW, at the same amount as in 2008, would cost businesses £300 million.

The BCC argues that hard-pressed businesses will be unable to afford a wage increase anywhere near that sum, and as a result, a zero per cent rise in the NMW should be adopted next year.

The business group is stressing that any increase above zero per cent risks adding to unemployment, which the BCC has already forecast to reach 3 million by 2010.

Commenting, Director General of the British Chambers of Commerce, David Frost, said:

"We're not opposed to the minimum wage going up when employment is high and the economy is doing well, but when jobs are being lost daily and a recession is in full swing, it makes no sense to increase the NMW.

“Most businesses are prioritising survival at the moment. A rise in minimum wage would not help firms hold onto staff and would simply add to unemployment."

Ends

Media Contacts:

Fiona Cunningham
Tel: 020 7654 5812
Email: f.cunningham@britishchambers.org.uk

OR

Sam Turvey
Tel: 020 7654 5813
Email: s.turvey@britishchambers.org.uk

Notes to Editors:

The Low Pay Commission will make its recommendations for National Minimum Wage (2009/2010) in March.

Key assumptions in order to establish the £300 million cost to business:

The NMW uprating will be the same in monetary amount as October 2008 (13p for 16-17 year-olds; 17p for 18-21 year olds; and, 21p for 22 and over). This is proportionally less than the increases in October 2008, i.e. the percentage increase is less.

The number of people earning less than the above increases in the NMW is the same as the figures in the 2008 uprating Impact Assessment based on the Average Earnings Index. It is assumed that these people will be earning the minimum wage.

The hours that each group works is the same as the figures used in the 2008 uprating Impact Assessment (just under a million workers).

The figures are calculated by multiplying the number of hours worked in a week by 52 to get an annual total. It is then multiplied by the amount of people within the age band that the uprated NMW will affect. This is then multiplied by the difference between the old NMW and the assumed increase. It is divided by 100 to obtain a figure in pounds.  

On the AEI assumptions:
16-17 year olds (13p change in '08): (30,000 X (29.6 X 52) X 13p)/100 = £6,002,880
18-21 year olds (17p change in '08): (100,000 X (25.5 X 52) X 17p)/100 = £22,542,000
22 and Over (21p change in '08): (800,000 X (26.6 X 52) X 21p)/100 = £232,377,600

This comes to a total of £260,922,480
Add an extra 15 per cent for labour costs (as they do in the Impact Assessment) and we get: £300,060,852