Jobs could suffer after 'low pay' rise

PLANS to double the number of people on the national minimum wage to more than two million will put a brake on job creation, senior industry figures have warned.

Trade Secretary Patricia Hewitt has said that the minimum wage will rise from £4.20 to £4.50 an hour next month and increase by a further 35p next year. In all, 2.4m people could benefit.

But employers fear the increase will be a disincentive to taking on staff.

Hewitt has told unions that she supports their claim for a minimum of £5 an hour and has rejected the employers' arguments that the pay minimum will cost up to one million jobs.

A report by the Low Pay Commission, chaired by Adair Turner, the former director-general of the Confederation of British Industry, said that the national minimum wage had no significant-impact on business and employment.

But the British Retail Consortium, whose members employ large numbers of low-paid shop workers, says the policy is wrong. A spokesman said: 'To set the wage level at £4.85 for next October when we do not know what state the economy will be in seems to be wrong. This is a tax on jobs and job creation.'

Ruth Lea, director of policy at the Institute of Directors, warned that the new rate would turn thousands of workers into tax dodgers.

'A single person pays tax and National Insurance on anything above £89 a week,' she said. 'With the minimum wage at these levels, what better incentive to go into the black economy. It will be business that will pay rather than the Government.'