West Midland business leaders have criticised the government after it emerged that the minimum wage is to increase by 2.2 per cent to £5.93 an hour.
Chancellor Alistair Darling made no mention of the rise in his hour-long speech to the Commons but in a 228-page Treasury document published afterwards it was revealed that the adult minimum wage will rise from the current £5.80 an hour in October.
The Government also announced extra measures to tackle youth unemployment by extending until March 2012 a guarantee of a job or training for every 18 to 24 year-old after six months out of work.
The news will be welcome to out-of-work youngsters in the West Midlands which has the highest unemployment rate in the country – 9.5 per cent according to the latest statistics.
Graham Aylott, policy officer of the Coventry and Warwickshire Chamber of Commerce, said businesses would be unhappy with the 2.2 per cent minimum wage increase.
He said: “This appears to have been slipped in under the radar. Companies will now have to contend with this on top of increases to National Insurance.
“In a time when great emphasis is being placed on job creation in the private sector, these increased costs are hardly an encouragement to businesses to take on new staff.
“Pay rises in the private sector are flat so this is an unwelcome step.”
Ben Burgher, of the Federation of Small Businesses, said: “Small businesses have been doing all they can to take on and retain staff during these tough times, but raising the minimum wage alongside the proposed one percent National Insurance increase will add to the wage bills of employers.
“For the worker after tax, this increase in the NMW will mean an extra £1.54 a week, but for an employer the impact of the increase could add thousands on to their wage bill.”
The British Retail Consortium complained that, in a year of continued economic uncertainty, the increase was “irresponsible”.
The BRC said it was “excessive” and at odds with government promises of prudence and with what was happening to pay generally, with many employers forced to freeze wages to safeguard jobs.
Director-general Stephen Robertson said: “A measure of this magnitude should have been in the Budget speech. This increase is downright irresponsible.
“It’s at odds with government promises of prudence and public sector freezes and will damage retailers’ ability to maintain and create jobs.
“The BRC supports the principle of the minimum wage, but it’s sheer madness to be forcing new costs on this scale on to retailers and their suppliers.”
TUC general secretary Brendan Barber said: “Once again the Low Pay Commission has managed to resist employer calls for a freeze and has been able to agree a modest increase to the minimum wage rate despite the difficult economic times.
“This rise will benefit around a million people and will mean an extra £5.20 in the wage packet of a 40-hour per week worker on the minimum wage.
“This is a relatively modest increase which the evidence shows employers can afford.
“In a rich country like the UK it is important that those who do low-paid jobs are not left behind.”
The government’s measures to tackle youth unemployment saw Alistair Darling pledge that, for the next two years, no-one under the age of 24 will need to be unemployed for longer than six months without before being offered work or training.
Work and Pensions Secretary Yvette Cooper said: “This investment means we can extend the Future Jobs Fund and keep helping young people as the economy recovers. We are determined to keep that support in place to help every young person get a good start.”