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National Minimum Wage Increase...Again
By Adrian Hobbs

The National Minimum Wage (NMW) will rise again by 2.5% in 2011. Can employers afford it? Perhaps a more pointed question would be: What impact will it have on businesses that can’t afford it? The increase though should make workers on the NMW smile but, will it?

Last year when I wrote the article Excessive and Irresponsible Wages based on the rising NMW, I didn’t think I would be writing another one on the same subject so soon. It turns out I was wrong. As from 1 October 2011, the NMW will rise from £5.93 per hour to £6.08 per hour. The British Retail Consortium (BRC) called last year’s NMW increase "excessive" and "irresponsible". The jury is out on what it will make of this year’s increase.

Can employers accommodate this increase in their wage bill? While there are some signs of economic recovery, these have not been the most encouraging. We are not out of the woods by any stretch of the imagination. Further, the potent danger of misreading the recovery signs continues to hover over any projections and economic “guesstimates”. Those employers that can afford the wage increases will therefore not be motivated to increase their workforce. Those that can’t afford the increase, and there will be a few, will be faced with the prospect of downsizing the workforce or winding up.

The Government has hinted that the private sector will provide the growth that will take the edge off public sector job losses. But, with the added burden of a rising wage bill, will private sector employees have the appetite to create new jobs?

If the wage increase forces businesses on the fringe to wind up then there will be some employees that won’t be smiling. If you ask the employees what they prefer, job security or wage increases and an uncertain future, the answer would be obvious. If the answer is obvious to the given then surely it must obvious to the giver. Or am I just speaking from an employer’s perspective?

Answers on a postcard.

Added: 20th April 2011

With over 25 years experience in making businesses more efficient, Adrian Hobbs is a pioneer in lean business modeling, employee development and change management.  Find out more about Adrian's company Flex Recruitment.

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