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CBI Crying Wolf On Living Wage

Wednesday, September 9, 2015

GMB Accuse CBI Of Yet Again “Crying Wolf” Over Impact On The Introduction Of A Living Wage

When the national minimum wage was introduced CBI predicted there would be substantial job losses but number of jobs has grown by 3.9 million jobs since then says GMB

GMB commented on the CBI warning that a living wage will hit profits and jobs. See notes to editors for copy of article in the Financial Times dated 9th September 2015.

In the July 2015 budget the Chancellor announced the introduction of a new compulsory National Living Wage for working people aged 25 and over, starting in April 2016 at £7.20 an hour and reaching £9 an hour by 2020. It was also announced that the Low Pay Commission to recommend future rises in National Living Wage to reach 60% of median earnings by 2020.

Brian Strutton, GMB National Secretary, said ”The incoming new director general of CBI should consider adopting a wolf in its coat of arms to pay homage to the long history of this organization for “crying wolf”.

This troupe of private sector companies bleating about having to pay a fairer wage to their staff is reminiscent of their predictions of Armageddon when the national minimum wage was first introduced 1999. They predicted there would be very substantial job losses. The number of jobs has actually grown by 3.9 million jobs since then.

The same CBI also pressed for the UK to join the Euro. Thankfully the Labour Government ignored them on this.

The CBI has a track record of exaggeration and they are exaggerating now on a living wage.

The fact is that the taxpayer has been funding employers who pay low wages and that has got to stop.

Where there is a genuine shortfall as in the care sector and other parts of the public sector that rely on public funding through budget stricken local authorities - the comprehensive spending review will need to address this urgently to avoid catastrophic failure”.

End

Contact: Brian Strutton 07860 606 137 or  Kamaljeet Jandu 07956 237178 or Lisa Johnson 07900392 228 or GMB Press Office 07921 28988 or 07974 251 823

Notes to editors:

Copy of article from Financial Times dated 9th September 2015

Living wage will hit profits and jobs, warns new CBI head

Sarah Gordon, Business Editor

Ministers have underestimated the “dramatic impact” of the national living wage on companies’ profitability and hiring, and badly timed its introduction, says the new CBI president.

“I’ve talked to several chief executives and been surprised by the impact on their profits of the change,” Paul Drechsler told the FT. “In one [big] company it would wipe out all of their profits.”

Mr Drechsler’s comments reflect growing business concern about the impact of the “national living wage” — set at £7.20 from April for over-25s — which was the centrepiece of George Osborne’s summer Budget.

Mr Osborne wants the rate to rise to £9 by 2020 and sees it as part of a compact with business, suggesting that tax cuts will offset more investment by companies in their staff.

Although the chancellor insists privately that company bosses have been supportive of the plan and he has received no complaints, this week has seen the first sign of a business backlash.

The Federation of Small Businesses warned on Tuesday that the rise in the minimum wage was affecting recruitment and growth prospects. Manpower, the recruitment company, said a survey of 2,100 employers suggested that many were scaling back recruitment plans with some blaming the increased minimum wage.

Mr Drechsler, who took over as president of the business lobby group in July, said it was “almost inevitable” that, in an effort to reduce the deficit, the UK government would continue to try to shift some of the costs it has traditionally shouldered on to the private sector.

The CBI president said while he believed the living wage was “socially?.?.?.?the right thing to do”, he believed the number of jobs it would affect had been underestimated.

“Would we necessarily have advocated the move to the living wage the way it’s happened?” he said. “It’s had a dramatic impact on quite a number of companies, possibly more than people originally intended.”

The introduction of the national living wage next year is expected to affect about 6m people. The Office for Budget Responsibility estimates that the extra costs to employers could mean up to 60,000 job losses.

Mr Drechsler said he believed that, after the increase, “people businesses” would pay their workers the living wage but with a fifth to a tenth fewer workers. The CBI president said the chancellor was focusing on the right priorities for the country — reducing the deficit and trying to accelerate economic growth — but he had been surprised by the decision to introduce the living wage.

Paul Drechsler acknowledges need to tread carefully during the debate over Brexit

“The government agenda overall is the right agenda?.?.?.?[but] it’s a decision I wouldn’t have expected to come at this time from this government.”

The Trades Union Congress has argued that the introduction of the minimum wage in 1999 was accompanied by similar warnings from business about its negative impact on jobs but employment rates went on to hit “all-time highs”.

“There is no future for Britain as a bad pay, bad jobs economy,” said Nicola Smith, TUC head of economics. “Higher pay is good for business and good for growth. Trade unions stand ready to work with employers and government to achieve the productivity gains that we know will deliver both employment growth and higher earnings.”

Mr Drechsler also expressed doubts about the efficacy of the apprenticeship levy. The Conservative government announced in June it would force all large employers to pay a percentage tax on their payroll to fund Britain’s apprenticeship system.

“We need every firm in this country playing their role in apprentice opportunities and I’m not sure that a levy system works,” he said.

The CBI president is expected to focus strongly on education and the need to improve skills in the UK’s workforce during his time in office. He said the current refugee crisis was “a different issue to immigration and skills”.

“The best thing business can do in this scenario [is] create more jobs, create more opportunities, create more wealth opportunities for people so we can deal with it,” he said.

“That’s what business should be focused on and as humans in business we need to engage in this in our regional and local communities in a way that makes sense.”

Additional reporting by George Parker

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