Minimum Wage: Revised hourly rate from 1 April 2017: Ministerial Comment

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A decision made on 25 November 2016:

Decision Reference: MD-S-2016-0081
Decision Summary Title :	DS Comment on P115 for £7.20 min wage		Date of Decision Summary:	25 November 2016
Decision Summary Author:	Policy Principal		Decision Summary: Public or Exempt?	Public
Type of Report: Oral or Written?	Written		Person Giving Oral Report:	N/A
Written Report Title :	WR Comment on P115 for £7.20 min wage		Date of Written Report:	25 November 2016
Written Report Author:	Policy Principal		Written Report : Public or Exempt?	Public
Subject: Comment to the States in response to the Proposition “Minimum Wage: Revised hourly rate from 1st April 2017” (P.115/2016).
Decision(s): The Minister decided to present to the States Assembly a Comment setting out the reasons why she does not support the Proposition (P.115/2016) for a higher minimum wage of £7.20 per hour from 1st April 2017.
Reason(s) for Decision: Deputy Mezec’s Proposition (P.115/2016) asks the States to request the Minister to revoke the Employment (Minimum Wage) (Amendment No. 10) (Jersey) Order 2016, (which would set a minimum wage of £7.18 from 1st April 2017) and to make a new Order fixing the minimum wage at £7.20 per hour from 1st April 2017. The Minister intends to oppose the Proposition and the Comment sets out her reasons for this. The Minister advised the Assembly less than two months ago that she had accepted the Employment Forum’s unanimous recommendation for a 3% increase in the minimum wage to an hourly rate of £7.18. The Minister is satisfied that the Forum presented credible evidence in support of its recommendation, having balanced all of the factors that it is required to take into account.
Resource Implications: None
Action required: Policy Principal to request the Greffier of the States to arrange for the Comment to be presented to the States at the earliest opportunity before the States debate (listed for the sitting of 29 November 2016).
Signature:		Position: Minister
Date Signed:		Date of Decision (If different from Date Signed):

Minimum Wage: Revised hourly rate from 1 April 2017: Ministerial Comment

COMMENT - P.115/2016 – Minimum wage – revised hourly rate from 1 April 2017

The Minister does not support the Proposition to set a minimum wage of £7.20 from 1 April 2017 for the following reasons –

The Minister advised the Assembly less than two months ago that she accepted the Employment Forum’s recommendation for a 3% increase in the minimum wage. The Minister described in a report [1] her reasons for that decision, which included;

This is the biggest percentage increase in eight years.
The increase is considerably higher than the increases in average earnings (2.1%) and the cost of living (1.5%).
The increase maintains the hourly rate at a figure that is equivalent to 41% of mean weekly earnings.
With growth and employment levels forecast to be flat for the next two years and with uncertainty following Brexit, it was reasonable for the Forum to take the advice of the Economic Adviser to exercise caution.
The 3% increase was agreed unanimously by the 9 members of the Forum; 3 representatives of employees, 3 representatives of employers and 3 independent members.

The Minister is satisfied that the Forum presented credible evidence in support of its recommendation, having balanced all of the factors that it is required to take into account. These are; the economy, competitiveness, responses from stakeholders and the States’ objective [2] that the minimum wage should be set at 45 percent of average earnings by 2026, subject to consideration of economic conditions, the impact on competitiveness and employment of the low paid in Jersey.

The Forum’s recommendation stated that “The Forum believes that businesses will be able to tolerate a 3 percent increase - the highest percentage increase for eight years - but considers that there is too much uncertainty at this time to take a more significant risk.” It also stated that “The Forum’s recommendation on this issue could have been different if it were not for the referendum outcome. In general, the economic signs appeared to be positive until the uncertainty and the unknowns of Brexit were factored in.”

The Forum conducted a detailed review, taking into account all of the available evidence, including the 168 written consultation responses, comments in person from representatives of stakeholders, and advice from the Economic Adviser and the Statistics Unit. The Forum is always careful to ensure that there is evidence to support its decision and does not disregard the evidence in favour of an arbitrary hourly rate.

Deputy Mezec’s Proposition does not challenge the evidence that was presented by the Forum and it does not offer any sound reason why this year - unlike in previous years - Jersey should try to match the highest minimum wage rates in the UK and Guernsey. The Employment Forum is not required to recommend a rate that matches the rates in Guernsey, the UK, or any other jurisdiction.

While it may be appropriate to look at developments in other jurisdictions, we must do so in context.

The UK rate of £7.20 is a premium rate for over 25s. Four lower rates apply for those under age 25, e.g. those aged 16 and 17 are entitled to only £4.00 per hour. Guernsey has also set a lower minimum wage rate for 16 and 17 year olds (£6.50). All Jersey employees over age 16 will be entitled to the full minimum wage of £7.18.
The decisions to set rates of £7.20 in both the UK and in Guernsey were political decisions. The decisions were not based on the recommendations of an independent body.
The remit for increases to the UK’s ‘national living wage’ of £7.20 is that the figure should reach 60% of median earnings by 2020, subject to sustained economic growth. Unlike the other minimum wage rates in the UK and the minimum wage in Jersey, there is no requirement to consider the potential impact on low paid jobs when setting this rate.

If this Proposition is adopted, the hourly minimum wage rate in Jersey will be based on a political decision rather than a non-political assessment of the evidence for the first time since the minimum wage was introduced in 2005. For an additional increase of two pence per hour (an extra £40 per year for a full-time employee), the Minister is not persuaded to disrupt the independent procedure and the trust that has been established between the States Assembly and the Employment Forum, the statutory body that it has created for the very purpose of providing an independent recommendation each year that is grounded in the evidence.

[1] R.102/2016 presented on 4 October 2016

[2] P.26/2010, as amended