CBI chief Raine Newton-Smith says the economy is a 'different beast'; when the minimum wage was established. Photo: Carlos Jasso/Bloomberg
But now many are wondering whether it has gone too far. Last night Newton-Smith spoke for many in the audience, arguing that what worked well in the 90s may not necessarily work in 2024.
“I don’t need to tell you how different the world was when the Minimum Wage Law was passed in July 1998. Blur had just headlined Glastonbury. The Truman Show just came out. And I was a young student at the Faculty of Economics and Philosophy at the university,” she told the guests.
“The economics I studied there was completely different. In general, for 1998 the growth was 3.4%. This is higher than in the US last year. Inflation was also only 1.6%. Compare that to today. In January, GDP fell 0.3% year-on-year. Meanwhile, inflation remains high at 3.4%.»
Her conclusion was that higher wages could further fuel inflation and so the focus should be on improving the economy instead. after months of talking with executives. .
The £1 an hour increase in the minimum wage, the biggest increase in cash since the legislation was passed, has created such tension that almost half of CBI members had to increase prices for consumers.
Small businesses such as nurseries have also been forced to increase tuition fees, with parents in recent months being told they will have to pay more from May as wages make up around 80% of the costs of running nurseries.
Business leaders are outraged.
Chiefs from retailers Next, Timpson and Currys, as well as nightclub operator Revolution Bars, are among those who have publicly criticized the government over the April pay rise.
Alex Baldock, chief executive of Currys, argues that raising the minimum wage while raising business rates and creating a new recycling law shows how little the government appears to care about his industry.
James Reid, boss. Recruitment giant Reed said April's rise would force employers to lay off staff or cut hours.
The UK now has one of the highest minimum wages in the world compared to regular wages, and economists fear unintended consequences if it continues to rise.
Tony Wilson, director of the Institute for Employment Research, says «there will inevitably come a point where high minimum wages start to destroy jobs, but we don't know that.» has this point arrived now?
He says research doesn't suggest that will happen at this stage — it's more likely that the country will suffer from a «balloon effect», where a higher minimum wage won't necessarily equate to higher revenues if companies are under pressure. simply adapt by cutting hours, hiring fewer employees, or offering less job security.
This could particularly impact women and young people, with retail and hospitality likely to feel the pinch.
< p>For now, however, most companies are struggling to find good jobs. Families across the country are struggling to pay rising bills.
Wilson says the first step is to get more people into the workforce. “There are a lot of vacancies there,” he says. “Attracting people to higher-paying, more productive jobs must be a priority.”
Many bosses are dreading the months ahead. Neil Carberry, chief executive of the Recruitment and Employment Confederation (REC), says businesses are concerned that politicians on both sides of the political spectrum will continue to raise the minimum wage for voters until it is «too late» and the damage is done. will be applied. /p>
He believes April's rise «really doesn't keep up with price and wage inflation» and could particularly hit small, part-time businesses in rural and coastal towns.
«Price needs to be will adopt other coping mechanisms, such as reducing working hours and changing shifts,” he says. “It is always worth remembering that the companies covered by the national minimum wage are consumer-facing ones and are the ones most affected by the pandemic.”
After a quarter of a century, the minimum wage has clearly come of age. But for many adults, birthday celebrations may become increasingly muted.
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