Politics & Policies

Minimum Wage in UK – Low Pay Commission recommends 3%

The Low Pay Commission (LPC) has today recommended to the Government that the adult rate of the National Minimum Wage, which applies to workers aged 21 and over, should rise by 3 per cent to £6.70 from October 2015.

The LPC’s aim is to advise on a rate that protects as many low-paid workers as possible without damaging jobs or the economy. We have carefully weighed the risk of doing too little to raise the earnings of the lowest paid against the risk of recommending more than business and the economy can afford.

With inflation now forecast at 0.5 per cent, this recommendation (PDF, 89.3KB, 3 pages) would, if accepted by the Government:

  • be the largest real-terms increase in the NMW since 2007, taking its estimated real value three-quarters of the way back to its highest ever level.
  • increase the NMW to its highest value relative to other wages. Its bite – the value as a proportion of typical wages – is already at its peak. This would increase it further. Influential in our recommendation has been evidence of strong employment growth in low-paying sectors and firms of all sizes.
  • expand coverage of the number of jobs covered by the main rate of the minimum wage to an estimate of over 1.4 million (PDF, 1.87MB, 13 pages) . This compares with 900,000 at the start of the downturn in 2008, as the minimum wage has risen in relation to median earnings.

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”.

As well as its recommendation for the adult rate, the Low Pay Commission has also recommended:

  • an increase of 3.3 per cent to £5.30 in the Youth Development Rate, which applies to 18-20 year olds;
  • an increase of 2.2 per cent to £3.87 in the 16-17 Year Old Rate;
  • an increase of 2.6 per cent to £2.80 in the Apprentice Rate, which applies to all apprentices in year one of an apprenticeship, and 16-18 year old apprentices in any year of an apprenticeship;
  • an increase of 27 pence in the accommodation offset to £5.35. The offset is the one benefit-in-kind that can count towards the minimum wage. This is the maximum daily sum employers who provide accommodation can deduct towards those costs.

Capture d’écran 2015-02-26 à 08.47.53

Chosen excerpts by Job Market Monitor. Read the whole story at Low Pay Commission recommends 3% increase in the National Minimum Wage to £6.70 – Press releases – GOV.UK.

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