Fears 4% minimum wage rise could spark inflation
PLANS to lift the wages of some of the island’s lowest-paid workers will meet resistance in the States next week.
Some people working in retail and hospitality, care home staff and cleaners are likely to be among the beneficiaries of Employment & Social Security’s plan to increase the adult minimum wage by 4% from £8.70 to £9.05 per hour.
But the proposal has not gone down well with the Committee for Economic Development, which is concerned about rising inflation and unemployment.
By a majority, Economic Development was instead supportive of a 2.3% increase in the minimum wage, in line with June’s inflation rate.
Since then inflation has risen to 3.3%.
In a letter to ESS, Economic Development president Deputy Neil Inder wrote that no evidence had been provided on the potential costs or economic impact of the proposals.
‘Some industry sectors are more likely to employ individuals on the minimum wage than others, for example the hospitality, retail and agriculture sectors, and there is therefore scope for some industry sectors to be more significantly affected by larger increases in the minimum wage and associated rates.
‘In the absence of this data it is very difficult to establish whether the proposed increases to the minimum wage rates could have unintended consequences for inflation and unemployment.’
Earlier this week it was announced that the UK’s adult minimum wage will go up to £9.50 from April next year, and in Jersey it will be at least £9.22.
Local charitable groups have pointed out that most minimum wage earners in Guernsey are entitled to receive income support, and therefore the States is effectively subsidising businesses who pay low wages.
The plan was drawn up by ESS under a guiding principle that it is unacceptable for employees and workers to be paid low wages to the point of exploitation.
Increasing prices and the high cost of living have highlighted that people on minimum wages do not have enough to live on in Guernsey, even if they live in social housing.
Plans to increase the minimum wage ahead of inflation were put on hold last year after Covid and that still applies. The intention of raising the wage to 60% of average earnings, which would currently be a gross annual wage in the region of £21-22,000, remains an ambition for ESS.
The committee also wants to increase the young person’s (16-18) minimum wage to £8.70 per hour.
