"The BCC has welcomed the Government's recent moderate and sensible decision on the October 2007 increase in the NMW. But some of the damaging effects of earlier increases are now becoming apparent. Indeed, some worrying effects on service sector jobs in a few key areas have started to emerge even before the 5.9% increase in the NMW that came into effect in October 2006.
A detailed analysis of job changes in the various sectors signals a sharp worsening in the relative position of the "Distribution, Hotels & Restaurants" sector, where one can expect to find an above-average number of relatively low-paid people. Having grown steadily until the end of 2004, the "Distribution, Hotels & Restaurants" sector has lost 85,000 jobs in the seven quarters to Q3 2006. An average quarterly growth in jobs of 16,700 in the "Distribution, Hotels & Restaurants" sector, over the 29 quarters to Q1 2004, has been transformed to an average quarterly loss in jobs of 12,100 in the following 7 quarters. David Kern concluded: "While it is premature to extrapolate current trends, there is clearly a risk that the position may worsen further in the next 12-18 months.
In its recent Press Release, the Low Pay Commission states: "Our present view is that the increases we are likely to recommend for 2008 in our next report will be around the predicted rise in average earnings". However, given the underlying pressures facing many businesses, particularly small firms, such a recommendation could be unwise. If the worrying trends presented in this note persist, it would be prudent for the Commission to persevere next year with a further NMW increases below the expected rise in average earnings."