Minimum Wage: revised hourly rate from 1st April 2013 (P.25/2013) – comments.

STATES OF JERSEY

MINIMUM WAGE: REVISED HOURLY RATE FROM 1ST APRIL 2013 (P.25/2013) – COMMENTS

Presented to the States on 18th March 2013 by the Minister for Social Security

STATES GREFFE

2013   Price code: A  P.25 Com.

COMMENTS

The Minister for Social Security does not support the Proposition.

Deputy G.P. Southern of St. Helier 's report recognises that minimum wage increases since 2005 have kept pace with increases in earnings, and presents no evidence as to why the Forum's unanimous decision should be called into question.

Unlike  the  Employment  Forum,  the   Deputy  shows  no  regard  for  the  uncertain economy, the views of consultees, or the difficult balance between protecting earnings as well as jobs for the lower-paid. As described in the Forum's recommendation, the evidence pointed to a need for continued caution –

• In August 2012, the States Economic Adviser had expressed caution to the Forum; prospects for the global economy had weakened in the first half of 2012 and trends in the local economy continued to weaken in 2012.
• The level of economic activity in Jersey, as measured by GVA, fell by 1% in real terms in 2011.
• Whilst  there  was  a  1.8%  increase  in  earnings  across  the  private  sector, consultation revealed a continued expectation of low wage increases and wage freezes.
• Calls  for  a  freeze  were  more  strongly  and  more  widely  expressed  by employers and employers' associations than in any previous minimum wage review.
• The average annual rate of increase in average earnings during the 4 years since the global economic downturn had been lower than any annual increase seen in the preceding 20 years.
• In June 2012, two-thirds of minimum wage jobs were estimated to be in the agriculture  and  fishing,  and  hotels,  restaurants  and  bars  sectors.  It  was primarily the employers that would be directly affected by any increase that expressed the need for a freeze.
• Jersey's minimum wage rate is higher than the minimum wages in the UK, Guernsey and the Isle of Man. This has an impact on the competitiveness of the hospitality and agriculture industries in particular.
• In August 2012, 330 more people were unemployed than in August 2011.
• Long-term unemployment peaked in 2012.
• One third of employers who responded to the Forum's minimum wage review had reduced overall staffing levels during the previous year.
• The Employment indicator in the Business Tendency Survey had reduced in both the public and private sectors and decreased to increasingly negative levels during the 9 months to June 2012.

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The Deputy quotes the aspirations of the former Minister for Social Security for greater  minimum  wage  increases  when  we  are  out  of  recession.  However,  the conditions locally are still difficult –

- Across  all  sectors  of  the  economy,  all  10  business  tendency  indicators continue to be negative, including business activity, profits, employment and future employment (Business Tendency Survey, December 2012).

- Total employment fell by almost 1% in the year to June 2012 and the number of vacancies in the private sector was the lowest for at least 13 years (Labour Market Review, June 2012).

- The  number  of  people  registered  as  actively  seeking  work  at  the  end  of December 2012 was at the highest level recorded to date (Unemployment Report, December 2012).

In 2010, the States decided that the minimum wage should be equivalent to 45% of average earnings within 5 to 15 years, subject to consideration of economic conditions and  the  impact  on  competitiveness  and  employment  of  the  low-paid  in  Jersey. According to Deputy Southern , the stated purpose of that Proposition was to set "the right political framework within which the Employment [sic] can feel supported in judging the pace at which the minimum wage rate can be improved."

The report to the current Proposition asserts that the minimum wage has remained below 40% of average earnings since 2009. The Deputy bases his calculations on the mean weekly earnings figure that is released by the Statistics Unit, 4 months after the minimum wage has increased in each year. The table below shows, for each year, the minimum wage as a percentage of the mean weekly earnings at the time of the minimum wage increase. The proposed rate for 1st April is equivalent to 40.2% of the mean weekly wage.

The   Deputy  does  not  explain  how  he  calculated  an  estimated  annual  saving  of £185,000  in  income  support  payments.  The  additional  7 pence  per  hour  would increase earnings by around £100 per year for income support purposes. At the end of 2011, 1,865 income support claims included one or more working age adults in work. It appears that the Deputy 's estimated saving is based on an assumption that most, if not all, of the workers who receive income support are minimum wage earners, which is not the case.

Members are urged to support the recommendations of the independent Employment Forum and to reject this Proposition.

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