Crippling cost of a minimum wage

By Sarah-Jane North

The hotel and catering industry would bear the brunt of a national minimum wage at whatever level it was set.

These new calculations appear in a report by the Greater Manchester Low Pay Unit, released last week.

They show that the sector's total wages bill would rise by nearly 11% if the hourly rate was set at £4.25, the minimum being demanded by the trade unions. But the wages bills of other industries would remain virtually unscathed, the majority facing an increase of no more than 2%.

Even a minimum of £3.50 would have more of an impact on hotels and restaurants than any other industry. Set at this level, it would raise the wages bill by more than 3%, compared with less than 1% in every other sector.

The Low Pay Unit calculates that 45% of employees in the industry are paid less than £3.50 an hour, while more than 70% get less than £4.50.

"This is an industry which, even by its own admission, is notoriously low paid," writes the report's author, Gabrielle Cox. "Indeed, the low-paying nature of the industry is seen as one of the key factors in continuing skills shortages, recruitment problems and high staff turnover."

The British Hospitality Association (BHA), which has publicly stated its opposition to a minimum wage, said the report's calculations fell short of the true potential impact on the industry.

"Raising the pay of one group will mean adjusting pay differentials further up the scale," said Martin Couchman, BHA deputy chief executive. "Unless this has been taken into account, they have grossly underestimated the costs to this industry."

He added that employers forced to raise their pay rates would ultimately look for savings elsewhere, possibly by cutting perks and jobs. Mr Couchman also doubted that a rise in wages would solve the industry's recruitment and retention problems. "These problems are due to a whole range of factors, not just pay," he said.