Businesses have major concerns about the short and long-term economic impacts of proposals to harmonise living wage and minimum wage rates.

The Examiner revealed details of a leaked report which showed that plans to increase the minimum wage to £13.73 in April 2025 could cost private and third sector businesses up to £188m in the first year alone.

Now the island’s Chamber of Commerce has responded to the findings of the report that was commissioned by the minimum wage committee.

It noted that the report highlighted some potential benefits, but also reflected business community concerns about potential negative impacts.

While businesses support moves to help lower paid employees, said Chamber, the proposed increase will have an impact that is not in the island’s long-term economic interests and could lead to more redundancies and business closures.

It pointed out many employers are already under extreme financial pressure and need more time to phase in the changes.

The chamber is urging government to reconsider the April 2025 deadline and look at what support could be provided to help businesses offset some of increased costs. 

Its chief executive officer Rebecca George said: ‘Chamber appreciates the good motives behind Tynwald and government’s commitment to transition to the minimum wage by April 2025, but there are still widespread concerns in the business community.

‘Chamber, acting on behalf of the business community, has major concerns regarding the proposed timeline and its potential economic ramifications.

‘Increasing the minimum wage hourly rate to £13.73 in April 2025 would represent an increase of 28% when compared to the 2023 rate of £10.75.

‘The proposed increase is approximately 14 times greater than the current inflation rate which is around 2%.

‘The living wage increases are also above the inflation rate, and the combined effects of these disparities will make Isle of Man businesses less competitive.

‘But businesses are also concerned about the speed at which the new minimum wage rate is being introduced and the difficulties it creates in terms of employers maintaining financial sustainability.’

The report, which was conducted by Pragmatix Advisory, found that the impact of any wage increase for lower paid workers would be diluted by increases in tax and National Insurance.

It’s important to note, said Chamber, that while the island’s minimum wage has risen by around 38% since 2018, personal allowances have risen by only 9% over the same period. 

Increasing the minimum wage by 28% could have several significant impacts especially on the retail, hospitality and care sectors, the report finds.

The Chamber said there are many concerns within the business community, with the three most important being economic disruption and job losses, inflationary pressures and price increases and the need for gradual implementation.

Overall, said Chamber, while higher minimum wages can improve living standards for workers, the impacts on a number of sectors in the Manx economy are likely to vary depending upon individual business models, market conditions, and consumer responses.

In a joint statement, the Department for Enterprise and Treasury said they had to balance the needs of employers and employees and take into account the broader economic context.

They said it was up to the minimum wage committee to review the report's findings, along with other inputs from their consultation process, to make a ‘well-rounded’ recommendation - to enable the departments to lay a proposal before Tynwald in October.

‘Given the report’s limitations due to its sample size, it is expected to be considered as one element in a broader assessment,’ they added.

‘Ultimately any adjustments to the island’s minimum wage rates will be subject to Tynwald consideration and approval.'