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Change in Minimum Wage 4 July 2004

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 £4.55 per hour to £5.10 per hour, an increase of 12%. By comparison, the UK adult rate only applies to workers over the age of 22 and is set to rise to £4.85 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 particularly their effects on employment, inflation and competitiveness of businesses.

The Minimum Wage Committee’s unanimous 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 Alex Downie MHK.

Current earnings data analysed by The Treasury shows that approximately 3.6% of the workforce earn £5.10 or less per hour, so around 1200 workers of the Island’s employed workforce of approximately 33,600 stand to benefit from the proposals.

Minister for Trade and Industry, Alex Downie MHK said:

“This change will not adversely impact the economy, adding as it does only 0.1% to the Island’s wage bill overall. Even for the most affected sectors, such as retail and hospitality, the impact is estimated at less than 1%. As a result, this rise effectively balances social protection with economic progress.”

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 £4.05 per hour for 16 year olds (15.7% increase) and £4.60 per hour for 17 year olds and certain trainees (13.6% increase).

The Island’s position in regard to minimum wage rates for 16 and 17 year olds continues to lead that of the UK where proposals for minimum wage rates for those under 18 are being introduced for the first time in October this year. In relation to other jurisdictions the Island’s minimum wage provisions are amongst the best for workers. For example, the current adult rate in Eire is £4.66 per hour, France £4.70, Spain £1.86 and Portugal £1.47. There is currently no minimum wage in Jersey, although its introduction is proposed for April 2005.

Since its introduction in January 2002, the minimum wage has increased by nearly 25% whilst inflation has risen by less than 11%. It has therefore succeeded in protecting those on low incomes and raising their living standards materially.

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