CBI says Labour’s minimum wage increase would strain businesses

Posted on 22 Sep 2014 by Tim Brown

The CBI has said that Labour's plan to raise the minimum wage to £8 an hour if it wins the general election could put job creation at risk.

Katja Hall, CBI Deputy Director-General, said that in the opinion of the CBI, the current minimum wage is set at the highest rate possible before it puts job creation at risk.

According to the CBI, the minimum wage has risen more than average earnings throughout the recession and recovery and is set to increase by more than 3% from October.

“The Low Pay Commission is one of the biggest success stories of the last Labour Government and makes its judgements based on considerable independent expertise. The LPC is not for politicians to play politics with,” said Ms Hall..

“The national minimum wage has enjoyed broad business support and a move to a politicised US-style system is not in the interest of companies or workers.

“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. Instead, politicians should address how people move on in their careers, through training and better skills, helping them move to higher paying roles over time.”

Nick Clegg discusses working life with an Apprentice.
Deputy Prime Minister Nick Clegg discusses working life with an apprentice.
However, announcing the policy in interviews with the Sunday Mirror and Observer newspapers and said that: “Too often people think that politics doesn’t care about them. They are the wealth creators just as much as the top entrepreneurs and the top business people. And we’ve got to reward them.”

Mr Miliband’s proposed rate is said to be similar to that in force in Australia and EU countries such as Belgium and Germany, but lower than in France and New Zealand.

The Labour leader rejected claims it would cost jobs and be unaffordable for the public sector, such as local councils and hospitals, who are among the biggest employers of low-paid staff.

“It is actually going to save money in benefits,” the Labour leader told BBC1’s Andrew Marr Show.

“What is happening at the moment is that we are spending billions of pounds subsidising employers who are paying low wages, billions of pounds in benefits, tax credits and housing benefit.

“It is going to have no cost at all to the public sector, and it is the government’s own figures that say that.”