Call for National Minimimum Wage increase formula

November 12 2004 - UK manufacturers have called again for a formula to be used for setting future increases in the National Minimum Wage, arguing that evidence is beginning to mount that recent increases in the National Minimum Wage are beginning to bite.

Arguing in evidence submitted to the Low Pay Commission, EEF - the manufacturers’ organisation - claim that recent increases in the National Minimum Wage have been well above the rate of inflation and pay settlement levels and that they are starting to have an impact on manufacturers’ pay levels and their remuneration structures through the need to maintain pay differentials.

Consequently, EEF has repeated previous calls for a formula to be used to determine future increases in the National Minimum Wage. Such a formula would:

- provide employers with the benefit of greater certainty about future increases;

- enable them to plan and budget for any cost increases more easily; and

- help them to reduce the adverse impact that these increases will have upon their competitive position.

- EEF argues that future increases in the NMW should be based on a retrospective analysis of the movement of basic rates of pay across the economy. Such information may not currently be available from official statistical sources but EEF considers that the average level of pay settlements that has been reached across the economy over the previous 12 months would provide a good approximation.

EEF also consider that the TUC’s recommendation to increase the NMW to £6 per hour over the next two years will impact adversely on the costs of many manufacturers and therefore threaten international competitiveness and employment.

Commenting on its evidence, EEF Deputy Director of Employment Policy, David Yeandle, said:

"Whilst to date manufacturing companies have generally been able to live with the National Minimum Wage, recent increases are clearly now beginning to bite. With pressure mounting for further significant increases, what manufacturers now want above all else is certainty about the impact that future increases will have on their business so that they can plan accordingly."

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