Employers say £5 minimum wage would threaten jobs as TUC demands more

The head of the CBI, Britain's largest employers' organisation, warned yesterday that a rise in the national minimum wage to £5 would trigger an exodus of jobs to the Far East.

The head of the CBI, Britain's largest employers' organisation, warned yesterday that a rise in the national minimum wage to £5 would trigger an exodus of jobs to the Far East.

In an early warning shot across the bows of trade unions before negotiations for next year's deal, Digby Jones, its director general, said another rise would be dangerous. The minimum wage rises by 7.8 per cent to £4.85 an hour in October after a 7 per cent rise last year. A similar rise next year would take it to £5.20.

"The unions will say that this country can afford £5," Mr Jones said. "I have not heard one employer say it should go up: £4.85 is not dangerous but it is moving away from being a safety net to having a deleterious effect."

A manufacturer in Doncaster had told him if the wage went to £5 he would make his 400 staff redundant and move his factory to China, Mr Jones said. "The impact is not on cleaning, hotels and some retail; the threat is the lower end of the value-added jobs."

Once October's increase comes in the minimum wage will have risen by 35 per cent since it was started at £3.60. There has been a 24 per cent rise in overall pay levels over the same period.

The Low Pay Commission has started consultations before its next report in February next year on an October 2005 increase.

The TUC has said a rise to £5 would be too modest. Brendan Barber, the general secretary, said: "Every time an increase is proposed we hear the same noises from employers forewarning the demise of the economy and the worrying implications for British jobs, yet every increase achieved since 1999 has been absorbed without any adverse effect on the economy."

The Low Pay Commission had recognised the need for rises above average earnings, which would yield a figure substantially above £5 an hour, he said.

A report last week from Industrial Relations Services, a labour market think-tank, said some firms were considering additional pay reviews this autumn to come in line with October's rise. Econ- omists believe the increase could be enough to push overall earnings growth to 4.6 per cent, above the 4.5 per cent the Bank of England sees as consistent with hitting its inflation target.