Jobs not at risk from pounds 3.50 wage

Despite ministerial protestations a national minimum wage would not cost jobs, according to a seminal investigation conducted by one of Britain's leading experts on the issue.

Employers expect that a future Labour government would fix the rate at around pounds 3.50 an hour which would have no impact on total employment, Dr Fred Bayliss points out in a paper published by the Employment Policy Institute which declares itself "neutral" in the debate.

"Even if some sections of industry are severely affected by a NMW [national minimum wage] this does not necessarily imply the kind of 'devastation' of jobs predicted by some opponents of the policy," Dr Bayliss says.

Some ministers have talked of hundreds of thousands of job losses.

Because of the paper's practical tone and the eminence of its author, a former chairman of the institute, the pounds 3.50 figure - uprated in line with prices - is now likely to become something of a benchmark for Labour, in private at least.

The biggest unions are presently demanding pounds 4.26 an hour, while the Trades Union Congress in a confidential document favours a figure nearer pounds 3.65. The paper warns that employers believe the possible inflationary consequences of the sum are more significant than the effect on jobs, although the "price effects" should not be too severe.

Ian McCartney, a Labour employment spokesman, yesterday greeted the report as a vindication of its policy, while the Government may now be keen to emphasise the inflationary impact, however limited.

Dr Bayliss argues in the report, Employers and a National Minimum Wage, that the effect of the statutory minimum will vary markedly between different industries.

The sectors most affected - catering, textiles and industrial cleaning - will experience "accelerated restructuring". Many small companies will come under "severe pressure" and they will have to fight to survive.

In some cases prices will rise, although there will be "little or no impact" on jobs because surviving companies will take over contracts and offer "replacement" jobs, Dr Bayliss says.

Some companies argued that the minimum should be phased in rather that brought in as a "big bang". While Labour has indicated that the rate for 16- and 17-year-olds would be lower, employers also contended that adult trainees should be exempt from the full rate.

In interviews with 25 senior managers in the public and private sectors and officials of employers' organisations, Dr Bayliss found that pay differentials were another worry.

He suggests that "modesty should prevail" in the process of setting the rate or that a future Labour government might consider a more general form of pay policy to contain the inflationary impact.

The report suggests that the Low Pay Commission, envisaged by Labour as an advisory body to government, should be able to mount its own inquiries and be responsible for inspection and enforcement.

Dr Bayliss concludes: "The devil is in the detail. The commission must examine how the minimum will work at different levels. It is better to anticipate the potential pitfalls in advance than to have to react when those employers hardest hit start to shout."

Polly Toynbee, page 15