It's too early for a rise in the national minimum wage!

I could not believe my ears when recently the Chancellor George Osborne stuck his neck out on the national minimum wage. He called for a hike in the NMW to £7 to compensate low-income workers for the economic crisis. This is all well and good and of course I’d love for everyone to be paid a living wage. But, and it’s a big ‘but’, can I venture to suggest that now is not the time to be saddling small and medium sized businesses (SMEs) with unrealistic additional costs? Of course, it is not the right time when the economy is still in its earliest, most tentative steps on the road to recovery.

I work with scores of SMEs and, on a daily basis, they complain that they feel like the ‘forgotten army’ powering the economy, creating jobs and prosperity but remaining unthanked for that vital job. I agree wholeheartedly with the CBI’s stance on this proposal which postulated that an “unaffordable rise would end up costing jobs” and recommended that the Low Pay Commission should make the final decision. The Commission was set up in the first place to stop such political posturing!

Interestingly, the Chancellor did not suggest a new level for the NMW, but his officials have been studying the implications of an increase from the current level of £6.31 an hour to £7 by 2015.

Even mooting a rise is a dangerous game to be playing at a time when SMEs are only starting to re-gain confidence and start hiring again. The looming threat of a pay hike will not help to stabilise matters but will instead force businesses into a bunker-like mentality. They will, in simple terms, be more inclined to shelve their aspirations or plans to hire and will be more likely to carry on with their existing staff levels.

If the new NMW levels are implemented, it could well mean that businesses may, however reluctantly, choose to shed staff. Now, that would be unforgivable. So, come on Chancellor choose your moments please! A couple more years of growth in the economy will mean that SMEs are more likely to be able to bear an increased wages burden. That would be the ideal time to talk publically about a wages hike.

Smaller businesses should be supported and encouraged to grow whilst still giving lower paid earners more in their pockets. I’d recommend taking more earners out of tax and NIC (particularly employers’). That way, more people will be able to come off benefits – a net saving to UK PLC!