The true cost of the minimum wage

A new report suggests expanding the minimum wage to 21-year olds will actually create wealth for business...

Last Updated: 31 Aug 2010

The Employers Forum on Age (EFA), a workplace age equality think tank (yes, there’s one for everything), has praised the government’s decision to extend the adult minimum wage to 21-year-olds, saying it will benefit business by increasing the overall productivity of each worker. At the moment, the full minimum wage of £5.52 applies only to workers aged 22 and over, while those aged between 18 and 21 get £4.60 (and 16 to 18-year-olds get £3.40).

According to the EFA, higher wages will bring more candidates into the workforce, offering employers a greater range of choice. The think tank recognises that the move will mean higher costs to the employer initially – but it says this will this be offset by the increase in labour supply, and by the eventual increase in spending power. It reckons this will actually end up benefiting the economy by a whopping £227m a year.

However, not everyone’s convinced. Lots of small business groups are arguing that the move will cost companies a fortune and reduce Britain's competitiveness – the very last thing UK plc needs at a time when the economy is slowing and costs are going through the roof.

The Forum for Private Business, for example, argues that this extension to the minimum wage will cost small businesses an extra £88m a year. It reckons the government’s move is entirely motivated by its current unpopularity, suggesting that it wants to bolster its support by pandering to the unions and other left-wingers (perish the thought). Lest it appear mean-spirited, we should stress that the FPB isn’t against the move in principle – it just thinks the timing stinks.

But amid all this pay controversy, it’s good to know that some people are still getting paid for stating the obvious. A recent survey (obviously inspired by Countdown favourite Carol Vorderman’s refusal to accept a 90% pay cut last week) has ‘revealed’ the shocking news that nine out of ten employees would not volunteer to take a pay cut, even if it might stem inflation or support their firm in times on trouble. Hold the front page, etc…

According to the survey, carried out by Tenon Recovery, 60 per cent of respondents suggested that their firms should take the hit, and that any cuts should be to corporate entertainment and ‘extravagant’ bonuses. Or to the ‘Pointless Surveys’ division, perhaps...

In today's bulletin:
More drama at ITV as profits slide
Can we really afford to cut stamp duty?
Company pension schemes lurch into the red
The true cost of the minimum wage
Pushy salespeople: a dying breed?

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