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The national minimum wage proves its worth

The issue of pay is always emotive and never far from the headlines, whether it is in relation to a banker’s bonus or at the other end of the spectrum - the national minimum wage (NMW).

However, perhaps there has never been a year where the announcement by the government following the recommendation of the Low Pay Commission (LPC) has been so anticipated, with employment falling and costs being critical to the possibility of further unemployment in the year ahead.

It is amazing that this year is the 10th anniversary of the introduction of the NMW on April 1 1999, when the adult rate was set at £3.60. There was a hue and cry that its introduction would lead to widespread layoffs and have a detrimental effect on labour-intensive sectors such as retail. In fact, quite the reverse occurred as, despite above-inflation increases in the NMW
over many years, retail employment kept growing.

This year has seen an increase of 1.22%, with the adult rate rising to £5.80 in October. With the Retail Price Index in negative territory and pay constraint very apparent in the private sector, many felt a freeze in NMW would have been appropriate this year. The LPC deliberated longer this year prior to submitting its report so it could take into account the latest economic figures, and the general consensus is they got it right. Rather like freezing subscriptions, the outcome is usually a larger than desired increase the following year and a similar situation would probably have occurred with NMW.

The British Shops and Stores Association has regular dialogue with the LPC and is in fact meeting with it later this week to start the 2010 round of deliberations. These discussions are very important in setting the tone for an outcome that affects us all.

  • John Dean is chief executive of the British Shops and Stores Association

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