Firms threaten jobs boycott in protest over minimum wage

Business leaders yesterday warned that some companies would boycott the Government's programme for jobless young people if they were forced to pay them the national minimum wage. Barrie Clement, Labour Editor, reports on the looming rift between ministers and the private sector.

Employers are set to clash with the Government over its insistence that up to 100,000 unemployed youngsters on work placements should be paid the national minimum wage - albeit at a lower "training" rate.

In its submission to the Low Pay Commission yesterday, the Confederation of British Industry (CBI) argued that participants in any of the Government's welfare to work programmes should be exempt from the minimum wage provisions.

However, in an effort to ensure the attractiveness of the New Deal initiative for jobless 18 to 24-year-olds, the Department of Trade and Industry (DTI) wants to ensure that they are covered by any national minimum wage. A recent Government document says employers will be expected to pay the "normal rate for the job".

Both the CBI and the Trades Union Congress, which also submitted evidence to the commission yesterday, are calling for a lower rate for trainees, but the CBI contends that those on publicly funded schemes should be exempt.

Employers' leaders argue that while companies will receive state subsidies of up to pounds 60 a week for taking on the unemployed, many businesses could refuse to offer jobs if they are forced to pay a statutory minimum wage.

In its written submission the CBI said: "There is a danger that the introduction of a minimum wage may prevent employers from taking on low-skilled workers, who may need considerable training before they are able to perform the requirements of the job. This may be particularly the case with small and medium-sized companies."

Ian McCartney, trade minister, is anxious that the New Deal will mark a break with the old, discredited "jobless schemes" and that the work placements are seen as "proper jobs".

The CBI yesterday counselled caution over the level of the minimum wage, which is expected to come into force in 1999, arguing that it should be struck at a "modest" rate.

The memorandum from the CBI said there was little evidence that the rates set by the old wages councils in the 1980s caused job losses. A minimum set in line with those rates - updated in today's prices and in the absence of any attempt to protect wage "differentials" - would not cause significant damage to the economy, the submission said. A CBI spokesman said wage council rates would translate to around pounds 3.20 an hour - the nearest the CBI came to mentioning a figure.

The CBI said a wage of pounds 4.40 an hour, which is favoured by some unions, would mean 250,000 job losses over two years and impact on inflation.

A more moderate official submission from the TUC yesterday called for minimum wage of "somewhat above pounds 4 an hour".

The Department of Trade has asked the commission to make recommendations on a lower minimum or possible exemptions for people under the age of 25. It is thought that the Government wants the legislation to exempt youngsters under the age of 18 and to set out a lower minimum rate for 19 to 25-year-olds on training courses.

Margaret Beckett, President of the Board of Trade, has told the commission that in making its recommendations it should take into account the wider economic and social implications and the effect of the minimum on employment and inflation. Mrs Beckett acknowledges that some companies, particularly small firms, may have special concerns.

Oral submissions to the commission, chaired by Professor George Bain, principal of the London Business School, started yesterday. Further submissions will be received in visits around the United Kingdom.