Minimum wage: Low Pay Commission backs a 3% increase

Business Secretary Vince Cable Business Secretary Vince Cable says the minimum wage rise would be the first above-inflation hike in six years

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The Low Pay Commission has recommended a 3% increase in the minimum wage to £6.50 an hour for adults.

It would be the first increase in real terms since 2008, if the government accepts the proposal.

The commission said it had to balance increased costs for businesses against doing more to help the lowest paid.

But it said the economic recovery justified the move, and that if it continued, 2014 would mark a "new phase" of larger increases.

"Provided the economy continues to improve, we expect to recommend further progressive real increases in the value of the minimum wage, restoring and then surpassing its previous highest level, so that 2014 will mark the start of a new phase - of bigger increases than in recent years," said commission chairman, David Norgrove.

Above inflation

According to his report, the proposed rise would increase the number of jobs covered by the minimum wage by more than a third, to about 1.25 million.

Since the economic downturn the minimum wage has risen faster than other wages, the commission noted.

But its real value, like average wages, has fallen because it has been exceeded by the cost of living.

Telling MPs about the proposed rise, Business Secretary Vince Cable said: "It is faster than inflation and that is the first time in six years that has happened."

Shadow business secretary Chuka Umunna MP welcomed the commission's recommendations.

"Labour said last year that we need to see above-inflation rises in the minimum wage to restore the value lost over recent years," he added.

'Insult'

TUC General Secretary Frances O'Grady said: "This is a welcome increase in the minimum wage, which starts to recover some of the ground it has lost since 2008.

"We hope this is the first in a series of bolder increases that will give real help to the low paid, and not just a pre-election boost."

However, the plans have not been universally well received.

The general secretary of the Unite Union, Len McCluskey, called it a "slap in the face for low paid workers."

Start Quote

We expect to recommend further progressive real increases in the value of the minimum wage, restoring and then surpassing its previous highest level”

End Quote David Norgrove Chairman, Low Pay Commission

At present, the minimum wage is £6.31 an hour for adults and £5.03 an hour for 18 to 20-year-olds.

Mr McCluskey added: "An hourly rise of 19p for adults is an insult when the minimum cost of living has increased by a staggering 25% since the beginning of the economic crisis."

Cautious welcome

Several employers' organisations, the EEF, the CBI and the Forum of Private Business gave the recommendations a cautious welcome.

The British Chambers of Commerce has surveyed its member companies on their attitude towards raising the minimum wage.

Its Executive Director of Policy, Dr Adam Marshall, said: "After years of pay restraint, companies now feel somewhat more confident when it comes to the question of pay.

"So while the Low Pay Commission's recommendation appears to be slightly higher than many employers had hoped, it represents a reasonable compromise."

The government usually accepts the Low Pay Commission's recommendations.

In January Chancellor George Osborne told the BBC he thought Britain could afford an above-inflation increase.

The commission's recommendations, which would apply from 1 October this year, also include an increase of 2% for workers aged 18-20 to £5.13 an hour.

Those aged 16-17 would see an increase of just under 2%, to £3.79 an hour.

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