UK Minimum Wage to Rise

The Low Pay Commission has recommended a small increase in the national minimum wage covering hundreds of thousands of Britain’s lowest paid workers and yesterday the government announced that Britain’s minimum wage will rise by 7p, or 1.2%, to £5.80 an hour. The new adult rate for workers aged 22 and over will come into effect in October. The rate for 18- to 21-year-olds will rise from £4.77 to £4.83, while for those 16 and 17, the statutory rate will go up to £3.57 an hour from £3.53. The increase means adults working a 40-hour week will receive at least £232 before taxes and other deductions.

Retail and hospitality, account for 44 per cent of all minimum wage jobs. The next largest industries, social care and cleaning, each account for 6 to 7 per cent.

In the light of current economic circumstances should the NMW have been frozen? RPI inflation has fallen into negative territory but CPI inflation remains well above the 2% target - so any NMW freeze would have meant a real wage cut for people at the bottom of the pay ladder. Indeed the rate of inflation experienced by such people is highly unlikely to be either of the two officially published inflation figures.

And decisions on the NMW have important implications for equity and efficiency in the labour market. The TUC argues that low paid workers have done nothing to cause the credit crunch and the subsequent economic crisis - so why should they pay the price with a wage cut? Supporters of a statutory pay floor would also argue that wage cuts could have a damaging effect on worker morale and productivity.

The minimum wage is not a living wage and thousands of people dependent on it have seen their hours cut as employers move to shorter-time working.

In a related story affecting restaurants and many other consumer service industries, employers will be banned from using tips to bring workers’ pay up to the minimum wage from October.