Labour's minimum wage pledge could hit hospitality businesses

Speaking at the Labour Party Conference in Manchester on Sunday (21 September), Miliband said he would increase National Minimum Wage (NMW) to £8 by 2020.

The proposed increase would be implemented by the Low Pay Commission over a period of five years, pushing the NMW from 54 per cent to 58 per cent of median earnings.

It would be worth £60 a week or £3,000 a year to hospitality workers on the minimum wage, who will see their hourly pay rise to £6.50 in October.

"One in five of the men and women employed in Britain today do the hours, make their contribution, but find themselves on low pay. But if you work hard, you should be able to bring up your family with dignity,” said Miliband.

Minimum wage target​

This is the first time that Labour has put a figure on its proposed five-year target for minimum wage, which would be linked to average hourly earnings instead of what the economy can afford year-on-year, as recommended by Alan Buckle in his independent review on low pay.

The pledge was welcomed by trade union GMB, who said it was the ‘necessary first step for workers to recover the nearly 15% drop in the value of earnings they suffered over the last six years.’

However, it was met with criticism from UK business groups, which warned mandatory minimum wage increases of this magnitude could put small businesses and job creation at risk.

"Raising wages in this way would put serious strain on businesses, particularly hard-pressed smaller firms with tight margins, which would end up employing fewer people,” said Katja Hall, CBI deputy director.

“Instead, politicians should address how people move on in their careers, through training and better skills, helping them move to higher paying roles over time.”

Hospitality view​

Speaking to BigHospitality, British Hospitality Association (BHA) deputy chief executive Martin Couchman said it was hard to predict what impact the proposed increase would have.

“We just don’t know what is going to happen to the economy,” he said. “We can comment a year ahead on the number - for example we thought this year’s 3.5 per cent increase was just about the maximum that people could afford - but it is very difficult to predict five years ahead.

“It might be that £8 would seem quite reasonable, or it might be that £8 would be absolutely disastrous for business.”

For this reason, he questioned whether Labour would even be able to deliver on its £8 promise.

“Until the LPC are asked to do this, and until the LPC say yes we can do this or we cannot do it, it is very hard to say what will happen,” he said.

“If you look at the LPC’s latest report they were very clear they were not in favour of even producing two-year forward recommendations, so it is not clear how they would produce five-year recommendations.”