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3.7% Increase for Minimum Wage 3 July 2007

Tynwald is to be asked at its July sitting to approve increases in the Island’s minimum wage rates. If the regulations are approved then the new rates for both adults and young workers will come into effect on October 1st this year.

It is proposed to increase the adult rate for workers over 18 from £5.40 per hour to £5.60 per hour (3.7% increase). By comparison, the UK adult rate only applies to workers over the age of 22, and is set to rise by 3.1% to £5.52 in October this year.

The new rate has been recommended by the Minimum Wage Committee, a statutory body under the Chairmanship of advocate Peter Wood made up of representatives of both employer and worker organisations. The Committee undertook a consultation exercise on the impact of changes to the Minimum Wage including their likely social and economic implications and their effects on employment, inflation and competitiveness of businesses.

The Minimum Wage Committee’s recommendation to the Department of Trade and Industry and the Treasury was accepted and the necessary regulations will be moved at the July sitting of Tynwald by Minister for Trade and Industry the Hon.David Cretney MHK.

The Minimum Wage Committee’s recommendations for increases in the minimum wage for workers under 18 years of age and certain trainees have also been accepted. The proposed new rates are £4.67 per hour for 16 year olds and £5.24 per hour for 17 year olds and certain trainees (both 3.8% increases).

In relation to other jurisdictions the Island’s minimum wage provisions are amongst the best for workers. For example, the current adult rate (aged 22 years and over) in the UK is £5.35 (increasing to £5.52 in October 2007). In Eire the rate is £5.84 per hour, France £5.56, US Federal Rate £2.92 and New Zealand £4.29. The Jersey adult rate is £5.40 and Guernsey are currently considering introducing a rate.

Current earnings data analysed by The Treasury shows that approximately 4.6% of the workforce earn below £5.60 or per hour, so around 1,600 workers of the Island’s employed workforce of approximately 40,700 stand to benefit from the proposals.

Among several other factors taken into account when determining the proposed rate for Minimum Wage is the rate of inflation. The proposed rate increase for the adult rate was in line with inflation at the time of consultation by the Minimum Wage Committee in February 2007. Since that time, inflation has increased by a further 0.8%. As a result, the proposed adult rate will have increased by 6.6% over the last 2 years, whilst inflation will have risen by 7.4% over the same period. It is important to note that this is a matter of timing each year due to the consultative process necessary to reach a recommended minimum wage. This issue has also arisen in previous years, where the inflation has fallen as well as risen on different occasions. The precedent is to adhere to the minimum wage recommended by the Committee as the rate of inflation is only one of a number of factors considered by the Committee. Since the introduction of the minimum wage in 2002, the adult rate of minimum wage has increased by 36% compared with an inflation rate of 22% over the same period (based on May 2007 rate). This shows that the minimum wage legislation has moved significantly towards the objective of improving the real earnings of lower paid workers in the Isle of Man.

Hon David Cretney MHK Minister for Trade & Industry states,

“I believe that this is one more positive step for those on lower wages to ensure a fair balance between economic growth and diversification and the need to ensure that all persons are properly rewarded for their labour.”

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