National minimum wage rises are costing retailers too much

05 October, 2007

Last year's minimum wage increase cost retailers £1.7 billion - 13 per cent more than expected.

The British Retail Consortium's annual NMW survey of retailers shows the impact of last year's 6 per cent increase was felt well beyond simply the cost of pay rises for those on NMW.

Retailers' efforts to maintain differentials for those higher up the pay hierarchy, at a time of higher than expected inflation, added £200 million to the £1.5 billion NMW cost they had budgeted for.

Between 2006 and 2007 retailers' total wage bills for shop-floor staff rose by 12†per cent, three times more than inflation, to £25.8 billion. More than half that increase was a result of the £1.7 billion that rising NMW added to wage bills. At the same time other cost pressures, including energy, rents and rates, also shot up while the prices retailers charge customers actually fell.

After four previous inflation-busting rises, we recognise the Low Pay Commission gave businesses some respite by recommending this year's three per cent increase, but last year it was six per cent, and 4 per cent and 8 per cent the years before that.

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.

Kevin Hawkins

director general

British Retail Consortium

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