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Wednesday, 20 December, 2000, 09:28 GMT
CBI warns on minimum wage
The hotel and catering sector has a concentration of low pay
The hotel and catering sector has a concentration of low pay
The CBI has warned that an increase in the minimum wage to more than 4 an hour would damage some sections of industry.

The minimum wage, which is currently 3.70 an hour, is under review by the Low Pay Commission.

With an election looming, the government is believed to have suggested a 30p increase in the minimum wage rate.

But the Confederation of British Industry, in its submission to the Low Commission, says that any further increases could hit company profits and lead to higher unemployment.

John Cridland, the CBI's deputy director general, said that "a figure in excess of 4 an hour could be extremely damaging to business."

The CBI warned that raising the rate higher would affect significantly more people, with 2.2m workers, or 8.8% of the workforce, gaining from a 4 rate.

And it said that the sectors that would be most affected would be retailing, leisure, textiles hairdressing, and social care.

Poverty reduction strategy

In contrast, the trades unions are calling for a 5 an hour minimum wage, the abolition of the separate rate for young people 21 and under, and automatic yearly increases in line with average earnings.

But the CBI urged the Low Pay Commission to take a cautious approach, avoiding an automatic rises "which could prove unaffordable in the event of an economic downturn."

It says that it still believes the minimum wage has worked well so far, with 1.5m workers receiving on average a 20% wage increase.

And it says the minimum wage should be a floor for wages, not an escalator for forcing up pay levels.

It calls for the Low Pay Commission to take a decision on purely economic grounds, "without undue influence of political considerations."

However, with a General Election expected this spring, the minimum wage is likely to be presented as a key part of Labour's strategy for reducing poverty among working people.

A 4 wage - although it would not be implemented until October - could provide a powerful slogan for the government.

This would result in an 8% rise in wages for poor workers, much in excess of any rise in prices or wages elsewhere in the economy.

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