THE incoming government should cancel its plan to introduce a minimum wage because the measure will hinder job creation and make it more difficult for people on the dole to reenter the labour market, the Small Firms Association said last night.

In their programme for government, released last week, Fianna Fail and the Progressive Democrats said the new administration would seek early consultations with the social partners before bringing in the measure.

Describing the inclusion of a minimum wage policy in the document as "off the wall", the SFA's director, Mr Brendan Butler, said it would "fly in the face of reality" and result in more unemployment.

A minimum wage would be of no help to those out of work, Mr Butler claimed, because it would not apply to them, and could make it harder for them to enter the labour market.

"It would have a negative effect on employment because an artificially determined minimum wage level would price certain jobs out of the market," he said. "Given the level of unemployment already existing in this country, this clearly would be inacceptable."

Mr Butler said a minimum wage would also affect competitiveness, generating upward pressure on pay across the economy.

"There would be a spate of follow on claims, where workers would seek to maintain differentials," he added.

He said small firms would suffer the most because they could not match the wage rates of multinationals and large employers.