The Low Pay Commission (LPC) has today recommended a 3% increase in the National Minimum Wage (NMW).
If accepted by the Government, the move would see low-paid workers salaries increase to £6.70 per hour from October 2015 for workers of 21 years of age and over – the largest real-terms increase since 2007.
As well as its recommendation for the adult rate, the Low Pay Commission has also recommended a 3.3% increase to £5.30 for 18-20 year olds, an increase of 2.2% to £3.87 in the 16-17 Year Old Rate and 2.6% (to £2.60) in the Apprentice Rate.
Commenting on the recommendation, David Norgrove, Chair of the LPC said:
“Last year we were pleased to recommend the first real terms increase in the value of the minimum wage since the recession.
“We argued that the minimum wage had proved its worth over the course of the slowdown, increasing relative to earnings generally and protecting the low paid during the downturn in a way not seen before albeit, as with wages for all other workers, its real value fell.
“Sharp increases in the minimum wage would put jobs at risk – not least bearing in mind pressure on low-paying sectors and small firms.
“We do believe however that the continued recovery, and in particular the impressive growth in employment of the low paid, should this year allow a further increase in the real and relative value of the minimum wage.
“An increase of 3 per cent to £6.70 is a larger real terms increase than last year and, on the basis of the most recent Bank of England inflation forecast, should restore three-quarters of the fall in the real value of the NMW relative to its peak in 2007.
“We judge that the improved economic and labour market conditions mean once again that employers will be able to respond in a way that supports employment.
“However, our recommendation this year is predicated on a forecast which foresees lower costs for business in fuel and energy, a strong economic performance, significant recovery in earnings across the economy and rising productivity.
“If these expectations are not borne out over the year we will take this into account when considering next year’s recommendation”.
Despite the recommendation, the NMW remains significantly lower than the ‘Living Wage’, a wage which is high enough to maintain a normal standard of living.
The Trade Union Congress (TUC) has warned that large numbers of households across Britain are struggling to get by on less than the living wage, which currently stands at £9.15 in London and £7.85 across the rest of Britain.
According to TUC analysis, one in five jobs in Britain pay less than the NMW and more than half of people in some areas earn less than this.
TUC General Secretary Frances O’Grady said: “Extending the living wage is a vital step towards tackling the growing problem of in-work poverty across Britain.
“Working families have experienced the biggest squeeze on their living standards since Victorian times, and these living wage figures show that women are disproportionately affected.
“Pay has been squeezed at all levels below the boardroom, and the government’s mantra about ‘making work pay’ is completely out of touch with reality.
“The number of living wage employers is growing rapidly and unions are playing their part in encouraging more employers to sign up and pay it.
“But we need to see a far wider commitment to pay the living wage from government, employers and modern wages councils – to drive up productivity and set higher minimum rates in industries where employers can afford to pay their staff more.”
Update: Commenting on details revealed today of the new minimum wage rates, to be introduced from October 2015, TUC General Secretary Frances O’Grady said:
“It is good that the minimum wage is set to go up more than average earnings, but if the recovery is really as strong and sustained as the Chancellor claims, the Commission could have been braver and given Britain’s lowest paid workers a bigger boost.
“We also need much bolder action to give those on the lowest pay a fair share of the recovery, including new modern wages councils to set higher minimum rates in industries where employers can afford to pay more.”