Minimum Wage: Revised hourly rate from 1 April 2012 (P183/2011): Ministerial Comment

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A decision made on 12 January 2012:

Decision Reference: MD-S-2012-0001
Decision Summary Title :	DS - Comment on P.183/2011		Date of Decision Summary:	4 January 2012
Decision Summary Author:	Policy Principal		Decision Summary: Public or Exempt?	Public
Type of Report: Oral or Written?	Written		Person Giving Oral Report:	N/A
Written Report Title :	WR - Comment on P.183/2011		Date of Written Report:	4 January 2012
Written Report Author:	Policy Principal		Written Report : Public or Exempt?	Public
Subject: Comment on P.183/2011 - Minimum Wage: Revised hourly rate from 1st April 2012.
Decision(s): The Minister decided to present to the States a comment in response to Deputy G.P. Southern’s Proposition to revise the hourly minimum wage rate (P.183/2011), lodged au Greffe on 22 November 2011.
Reason(s) for Decision: The Proposition would request the Minister for Social Security to set the minimum wage at a higher hourly rate than the rate recommended by the Employment Forum in September 2011. The Minister has decided to issue a comment that explains why he will oppose the Proposition.
Resource Implications: The comment has no resource implications.
Action required: Policy Principal to request the Greffier of the States to arrange for the comment to be presented to the States as soon as practicable, and before 17 January.
Signature:		Position: Minister
Date Signed:		Date of Decision (If different from Date Signed):

Minimum Wage: Revised hourly rate from 1 April 2012 (P183/2011): Ministerial Comment

P.183/2011 Minimum Wage: Revised hourly rate from 1st April 2012

COMMENT

The Minister opposes the Proposition and intends (subject to the States decision) to make an Order setting a minimum wage of £6.48 per hour, as recommended by the Employment Forum, for the following reasons:

The Forum has recommended a minimum wage increase of 16 pence per hour. The Minister recognises that a further 4 pence increase might be seen as inconsequential, but he is mindful of the wider direct and indirect impacts.

At this time, the labour market is very weak and unemployment is the highest priority; increasing employment costs could undermine the competitiveness of businesses, many of which are exporters, and risk further job losses.

There is a risk that the resulting impact to maintain pay differentials throughout a business might be unsustainable, also potentially leading to job losses.

The September Business Tendency Survey shows that many firms are already negative about employment prospects, now and in future.

The Deputy suggests that the Forum ignored data. The Minister is satisfied that the Forum considered all of the statistical data, economic evidence and consultation responses presented to it, and having balanced all of the relevant factors, reached its unanimous recommendation for a 2.5 per cent increase.

The political decision to gradually increase the minimum wage from 40 per cent to 45 per cent of the mean average wage is subject to consideration of economic circumstances. The recent cautious minimum wage increases are not the result of a policy change and larger increases relative to average earnings will be considered in the future, subject to improvement in the economy.

If wages are being frozen, and decreasing in some cases, the average earnings index will reflect this. The minimum wage is therefore likely to increase relative to 40 percent of average earnings over the coming years.

In most other jurisdictions where minimum wages exist, minimum wages have been frozen, or moderate increases have been applied, as in Jersey.

Businesses, particularly in the hospitality and agriculture industries, have already set their prices and tariffs for 2012 based on the Forum’s recommendation. Intervention in the hourly rate at this stage is disruptive and costly to industry.

States Members receive the Forum’s minimum wage consultation each year and are free to respond, anonymously if they wish, during that consultation period.