Minimum wage rise ‘would hit small businesses’

One of the leading mouthpieces for the small business community has called for a three-year minimum wage freeze to allow SMEs more time to continue their recovery and gain further certainty on labour costs.

While it has welcomed the establishment of the Low Pay Commission the Ibec-affiliated Small Firms Association (SFA) has said an increase is not needed at this point. The commission is due to deliver its recommendations on the national minimum wage to the Government during the summer.

Speaking at the weekend, SFA chairman AJ Noonan said: “The National Minimum Wage Act 2000 clearly sets out the factors which should be assessed as part of any review; namely inflation, movement in the earnings of employees, level of unemployment and employment; national competitiveness; and relevant exchange rate movements. On the basis of an assessment of these indicators, there is no rationale for increasing the national minimum wage at present.

“Looking at the profitability of small businesses, it is clear that they will have grave difficulty absorbing labour cost increases without productivity gain. From an examination of the 2012 average gross profits in small businesses, in the sectors with the majority of national minimum wage workers, it is clear that they would not be able to offset national minimum wage increases against profits.”

Mr Noonan claimed that a higher minimum wage would have a “disproportionate” impact on small businesses outside Dublin, where the national minimum wage represents a higher proportion of the average wage.

“Given the urban/rural imbalance already being experienced in the recovery, this is of particular importance,” he said.

“Small businesses truly are the engines of our economic recovery. We have a vital role to play, in terms of employment generation, especially in regional towns and villages and rural Ireland.

“Artificially increasing labour costs will not only dampen this recovery, but will ultimately lead to both the prevention of job growth and to job losses.

“It is the SFA’s firm conviction that it is imperative for the competitive position of Ireland that wage levels are decided in a competitive labour market and are not constrained by an artificial legal instrument such as the minimum wage.

“Small businesses are taking tentative steps to recovery and, in many cases, growth. The job of government is to make sure these steps can be taken with confidence and with the necessary supports in place.”

The SFA said that it has made its case for a three-year waiting period for any alteration to the minimum wage “in order to give small businesses, which are just starting on the recovery path, certainty over their labour costs”.

“This would also ensure that job creation efforts are realisable for the low-skilled workers and young people still on the live register, who need an entry point into work and upskilling from where they can develop their skills and increase their wages relatve to their productivity levels,” Mr Noonan said.

The association said that most small businesses would have no choice but to off-set minimum wage increases against reductions in hours or jobs, job growth or capital or skills investment.


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