Black Country Chamber urges caution over 'living wage'

First published in Business Daily

BLACK Country Chamber of Commerce has urged caution over proposals to introduce a living wage across the UK.

The initiative has been endorsed by Labour leader Ed Miliband, as well as London Mayor Boris Johnson. Mr Miliband’s proposals would see companies who do not pay a living wage named and shamed and excluded from bidding for Government contracts.

Chamber President Paul Bennett said: “On the surface, a living wage would mean more money in the pockets of consumers which, in turn, would boost the local economy. Economic analysis suggests improving the financial position of the less well off does increase consumer demand within the economy. This would help to encourage growth.”

“On a closer analysis, however, the arguments become rather circular. Such a measure is likely to fuel inflation at a time when there are already inflationary pressures in the economy through higher energy prices and the risk of higher commodity prices as a result of bad weather and poor harvests.

“Increasing wages in the immediate short term may increase growth but there is unlikely to be a longer term benefit if any increase is eroded by inflation.

“Of critical importance at the moment is to increase economic participation. Unemployment statistics do not always reveal the true facts. We need to achieve a sustainable reduction in unemployment and we have to recognise that.

“Many people cannot afford to take poorly paid jobs or temporary or zero-hour contracts. We need to promote responsible employment and payment of a fair wage but it is absolutely essential to be mindful of the need for our businesses to be globally competitive.”

Mr Bennett added: “For most businesses their staff will be their most important asset and paying a fair wage is an important part of the recruitment and retention policies of good employers.

“In order to reduce benefit dependency we need to increase the differentials between being in work and being out of work. We must make work pay to encourage more people to be economically active rather than opting for benefits.

“It is right that we should champion responsible employers but we do need to be mindful that too much intervention into pay levels may have the opposite of the desired effect and reduce the numbers in employment and available jobs.”

Mr Bennett suggests: “We need a better balanced economy, with a greater emphasis upon skills and training. In the longer term the only way to increase our prosperity and wage levels is by increasing our productivity and efficiency in the global market.”

He concluded that the Government should look at other ways of boosting the economy, such as infrastructure expenditure and enhancing support for exports.

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