The CBI has given oral evidence to the Low Pay Commission and called Commissioners to take a cautious approach for the 2022 rate arguing that many sectors have remained shut during lockdowns and are only starting to recover now.
Businesses are committed to raising living standards and think the LPC should protect the real terms value of the minimum wage but pay increases need to be underpinned by productivity or risk being passed onto consumers through higher prices. This is in line with CBI/Pertemps Network Group Employment Trends Survey which found that of those businesses affected by the National Living Wage (NLW), nearly 6 in 10 believe the LPC should take a cautious approach in 2022, while around one in ten firms (12%) think it should freeze. The remaining 32% of firms believe there should be an increase as planned.
The CBI also argued that even though businesses value the LPC’s indicative path for the NLW for the next few years as it helps them to plan ahead, under the current circumstances the right approach is to merely focus on how to make the NLW rate for 2022 affordable for businesses, rather than making considerations about the path to 2024. The medium-term impact of the pandemic on the labour market isn’t yet knowable given the uncertainty about impacts on median pay and unemployment. Average pay growth, for example, has been increasing for over a year, but this is because of the compositional effect of the JRS – a big proportion of the workers placed on furlough were in lower-paying industries so by removing them from the calculation pay has gone up.
According to the Employment Trends Survey, over 4 in 10 businesses (42%) believe it’s too soon to know the impact of the pandemic on the viability of the government’s 2024 target to increase the NLW to 2/3 of median earnings, while 26% already think that the target should be delayed. Businesses are increasingly nervous about their ability to meet the 2024 target, so an evidence-led approach should wait to see the impact of the pandemic on the labour market further into recovery rather than rushing to a decision now when the outlook remains so uncertain.
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