“The LPC must use its current review to spell out whether the minimum wage is meant as a basic floor for pay or a method of redistributing income from higher to lower wage earners in sectors such as retail. If the LPC has no clear vision of what success looks like, how does it know whether it's succeeding or not?
“Future increases should be guided much more closely by increases in median earnings in sectors, including retail, which are most affected by the minimum wage.
“If that had happened last year retailers would have faced a lower, more predictable increase rather than seeing a further £200 million wage bill pop up from nowhere.”
To achieve greater certainty the BRC wants the LPC to be guided in future by:
• Median earnings growth, in particular in sectors such as hospitality, retail and care where many employees are on NMW.
• The proportion of workers in each sector receiving NMW (indicated by the sector's median wage).
• Productivity (Gross Value Added) per person which factors in the business impact of changes in regulation, such as increases in annual leave, so indicating the affordability of NMW increases.
NMW has risen so quickly since its 1999 introduction that it is distorting pay structures and steadily becoming the standard wage rate in some sectors, eroding differentials and weakening rewards and incentives for improving skills. It has also been a key driver behind the doubling of the cost of employing people in the retail industry over the past decade.
The rate of increase of NMW, up 46 per cent since 1999, is now seriously slowing the rate of retail job creation. Between 2006 and 2007 UK retail selling space increased by five per cent but employment rose by less than one per cent, indicating that vacancies are either not being filled or new stores are opening with fewer staff per square foot of selling space.
The effects are particularly dramatic for small and medium sized enterprise (SME) retailers. They are spending 25 per cent of turnover on wages, compared with 17 per cent a year ago. The number of people employed by SME retailers actually fell over the year by four per cent or 31,850.
Complete details here
British Retail Consortium
marketing@alchempro.com
