RAISING the minimum wage may cause businesses to lose their ‘competitive edge’ and create less jobs, a business owner has argued.
Business figures have given a mixed reaction to government proposals to potentially increase the minimum wage, with Chancellor George Osborne considering an above-inflation increase.
The Low Pay Commission is due to make a recommendation next month, with the chancellor hinting a rise from £6.31 an hour to £7 an hour from October could be on the cards.
Peter Webb, owner of ETI, in Easting Close, Worthing, which employs over 200 staff, has criticised the plans.
He said: “The problem here is a significant increase in the minimum wage will tend to have a ripple effect on other workers’ wages.
“This ripple effect occurs when a rise in the minimum wage increases the wage received by workers earning even well above the minimum wage. Basically, everyone’s wages go up and then you have a spiralling inflationary problem.”
Mr Webb put his concerns to business minister Michael Fallon at a recent question and answer session for small businesses, held at pie company Higgidy, in Shoreham.
Mr Fallon said the Government was waiting for the feedback from the Low Pay Commission.
Reacting to the minister’s response, Mr Webb said: “Whilst I accept an above inflation rise to the minimum wage is necessary for the lower paid, Mr Fallen failed to appreciate that companies like my own will lose their competitive edge if wages increase significantly and ultimately this will mean less jobs.”
Worthing and Adur Chamber of Commerce CEO Tina Tilley said businesses could not be expected to pick up the costs of significant rises.
She said: “Cost of living rises are acceptable but if it is anything over that, profit margins are being tightened, so it is unreasonable to expect businesses to afford this.”
The chancellor has argued that the value of the minimum wage, in real terms, has dropped since the start of the recession.
With signs of an economic recovery beginning to show, he believes businesses can ‘absorb’ the potential increase.
Founder of Shoreham Higgidy, James Footit, said the rise would not directly affect the firm, as already pay well above the minimum wage.
He said: “It doesn’t directly affect us but in due course it will inevitably have a knock on effect on our costs.
“Ultimately we do believe that the minimum wage is too low to live on sustainably but it is always very difficult to pass on cost increases to our customers.”
Adur District Council cabinet member for regeneration Pat Beresford said he would need ‘a lot of convincing’ to believe the majority of firms would be seriously affected.
He argued: “I think in the overall financial process of running a company, it wouldn’t have such a big single item impact, compared to paying rising utility bills, for example.”
He added: “You need to give equal weight to the people being employed on the minimum wage and the businesses. I am happy to listen to business owners’ concerns.”
Worthing town centre manager Sharon Clarke countered Mr Beresford’s thoughts, stating that many were still feeling the effect of the recession and any cost rises would be of concern.
She said: “Retailers are having to sell at lower margins to attract customers and so many will have to look at making cuts to allow them to continue to trade and this could affect the number of staff they can afford to employ.”