A 2.5 per cent rise in the national minimum wage announced today by the UK government will danger the recovery, retailers have warned.
According to the new rates, set out by the Business Secretary Vince Cable, adults over 20 years old will now be guaranteed at least £6.08 an hour for any work completed in the country, up 15p on the old rate.
Independent body the Low Pay Commission (LPC) advised on the increase and the new rate will come into effect on October 1st 2011.
Cable commented: “More than 890,000 of Britain’s lowest-paid workers will gain from these changes. They are appropriate - reflecting the current economic uncertainty while at the same time protecting the UK’s lowest-paid workers.”
Adults on minimum wage between 18 and 20 years old will receive 6p more per hour and 16 to 17-year-olds will get an extra 4p per hour, whilst the apprentice hourly rate will go up by 10p.
The Association of Convenience Stores (ACS) has warned that the enforced jump in wages will hit small businesses, which count staff salaries as their biggest financial outgoing, disproportionately hard.
James Lowman, CEO of the ACS, said: “We are extremely disappointed that the LPC has increased the minimum wage by so much at a time when businesses are struggling to keep afloat.
“Why, when many public sector workers are facing pay freezes, does the government believe that businesses can afford a 2.5 per cent increase in the minimum wage?”
A study of 500 convenience store representatives conducted by the ACS last year found that 42 per cent have made redundancies in the last 12 months.
ACS also found that 50 per cent of these retailers thought that higher minimum wages had made them less competitive and 52 per cent said they had reduced the difference between junior and senior staff wages in 2010.
Lowman added: “We know that when the minimum wage goes up, retailers have to compensate by cutting back staff hours, laying off staff, reducing pay differentials or reducing investment in their business, and even in some cases minimum wage increases directly cause the closure of stores.
“This is an insensitive decision by the LPC and the government that will cost jobs and damage the recovery.”