A fervent – if not unexpected – divide has arisen between business leaders and unions after the minimum wage was increased by 15p per hour.
Ministers said they had accepted recommendations from the Low Pay Commission, giving a national minimum wage new adult rate of £6.08, while the statutory wage for 18-20-year-olds will increase by 6p to £4.98 an hour.
The rate for 16-17-year-olds will increase by 4p to £3.68 an hour and the rate for apprentices will increase by 10p to £2.60 an hour.
Business leaders said the rise was poorly-timed but union leaders say a bigger increase would be needed to keep pace with inflation.
David Frost, director general of the British Chambers of Commerce, said: “The change to the national minimum wage rates announced today is the wrong increase, at the wrong time.
“With over a million unemployed, the priority has to be getting people back into the job market. Youth unemployment is at a record high and we can’t afford to price young people out of work.
“It’s clear from speaking to businesses that a significant number are having to freeze wages in 2011. These changes will be a barrier to job creation, and ultimately economic recovery.”
Unison said the rise in the adult rate was outstripped by the increasing cost of basic living, while the 10p rise in the apprentice rate would not be enough to help young people hit hard by the recession.
General secretary Dave Prentis said: “This small increase is totally outstripped by the rising cost of essentials like food and fuel. The vast majority of a low-paid worker’s pay is eaten up by basic living costs, so increases in inflation hit hard.
“We know that many low-paid workers are already struggling with heavy debt. Others are cutting back on food, and what they spend on their children. Not only does this show that many families are really struggling - it’s also bad news for local shops and businesses.
“It’s wrong to suggest that a smaller rise in the young people’s rate is better for businesses.
“Hitting young people’s spending power is a direct hit on those businesses. We need strong demand in our economy to stimulate growth and recovery.
“Young people also need a helping hand - they are victims of a recession that they did nothing to cause.”
Stephen Robertson, Director General of the British Retail Consortium, said: “At a time when the priority should be getting more people into work, any increase in staff costs is an extra hurdle. This rise is at the very top end of what retailers could be expected to live with.
“Employers have just been hit by an increase in National Insurance, business rates have soared and retailers are still absorbing much of the increase in VAT. This increase in the minimum wage is yet another challenge to retailers when trading is already difficult on the high street.
“A third of retail staff are under 25. Young people are facing some of the biggest challenges on the jobs market at the moment, and this increase makes it harder for retailers to expand and create the jobs needed.”