Adult minimum wage rate to rise

 

The adult rate of the minimum wage is to rise by 11p to £6.19 an hour from October, Business Secretary Vince Cable announced today.

But the rates for younger workers will be frozen at £4.98 for 18 to 20-year-olds and £3.68 for 16 to 17-year-olds. Apprentices will enjoy a 5p increase in their minimum wage to £2.65 an hour.

The changes are in line with the recommendations of the independent Low Pay Commission and come into effect on October 1.

Mr Cable said: "I believe that the recommendations of the Low Pay Commission strike the right balance between pay and jobs, and have therefore accepted all the rate recommendations. The Low Pay Commission has done a good job in difficult circumstances.

"In these tough times freezing the youth rates has been a very hard decision - but raising the youth rates would have been of little value to young people if it meant it was harder for them to get a job in the long run."

LPC chair David Norgrove - who was today reappointed for a second four-year term - said: "We welcome the Government's acceptance of our recommendations on the rates for the National Minimum Wage.

"The Commission was again unanimous, despite all the economic uncertainties and the different pressures on low-paid workers and businesses. We believe we have struck the right balance between the needs of these workers and the challenges faced by employers."

The minimum wage was introduced by Labour in 1999 at £3.60 an hour for adults, and is revised each year on the basis of recommendations from the Low Pay Commission.

This year's 11p hike for workers aged 21 and over amounts to a 1.8% rise - around half of CPI inflation, which stood at 3.6% in the most recent figures.

It increases the annual pay for a full-time worker on 40 hours a week on minimum wage by £228.80 to £12,875.

Asked what the justification was for the freeze on rates for younger workers, Prime Minister David Cameron's official spokesman said: "We are accepting the LPC recommendations. I think the judgment that has been made is one about youth employment rates.

"Raising youth rates wouldn't benefit young people if it meant that it was more difficult for them to find a job."

Unison union general secretary Dave Prentis said today's announcement was "bitterly disappointing and will condemn millions of families to life on the breadline".

Mr Prentis added: "While the Chancellor looks set to cut income tax for the very richest, those at the bottom of the pay pile do not have enough to live on.

"An extra 11p an hour is simply not enough. Millions of workers need a living wage of £8 an hour to cope with rising prices and keep them out of poverty.

"And what message are we sending to our young people when the rates for those under 21 are frozen? They deserve a fair day's pay for a fair day's work, and should not be left vulnerable to exploitation.

"Of course it is taxpayers who lose out too, as they will have to pick up the in-work benefits bill because of Scrooge employers."

Paul Kenny, general secretary of the GMB union, said: "The proposed increase in the national minimum wage is below the rate of inflation and will lead to a drop in living standards for the lowest-paid workers in our economy. It is a missed opportunity to put purchasing power into the hands of those who will boost consumption.

"Freezing pay for young workers, many of whom work in the profitable retail sector, is a further kick in the teeth from the Government that increased tuition fees to £9,000."

John Longworth, director-general of the British Chambers of Commerce (BCC), said: "We are disappointed that the Government has chosen to raise the adult national minimum wage rate by 1.8% - far above our recommendation.

"While the pressures of inflation are hurting many people, especially the lowest paid, this decision adds significantly to the cost of doing business, and feeds wage inflation at higher levels.

"In his Budget on Wednesday, the Chancellor should offset the hike in the national minimum wage by scrapping the huge business rate rise which will affect many businesses from April. This rate rise will stop many from employing more people, whether on minimum wage or above."

Mr Longworth added: "We are pleased that ministers have heeded our call to freeze the youth and development wage rates. Freezing these rates will ensure employers are not put off from employing young people, and give them more confidence to invest in their training."

TUC general secretary Brendan Barber said: "The LPC should have been bolder in its recommendations. Even in the current economic climate there was room for an increase in the minimum wage that at the very least kept pace with inflation and earnings.

"It is wrong to deny young people an increase this year, as there is no evidence that the minimum wage has had an adverse impact on jobs. The reason why firms have not been hiring enough new workers is because they lack confidence in this Government's ability to set the UK on course for a sound economic recovery. There is now a real danger that young people will view minimum wage work as exploitative.

"Many of the businesses that are calling for the minimum wage to be frozen are also complaining about the lack of consumer spending. Boosting demand is vital - but this will not be achieved by squeezing the low-paid even further.

"Low-paid workers, like hairdressers, shop workers and care assistants, tend to spend 100% of any salary increase in their local economy, so a well-judged rise in the minimum wage would have a beneficial effect across the UK."

John Walker, national chairman of the Federation of Small Businesses, said: "We support the Low Pay Commission's underlying thinking that the priority must be to ensure young workers get employment and that the rates for these workers should remain unchanged until the economy picks up.

"However, we would have supported a larger increase in the apprentices rate, both in recognition of the value apprenticeships can have for firms and to encourage more young workers to enter into these schemes."

TUC general secretary Brendan Barber said: "The LPC should have been bolder in its recommendations. Even in the current economic climate there was room for an increase in the minimumwage that at the very least kept pace with inflation and earnings.

"It is wrong to deny young people an increase this year, as there is no evidence that the minimum wage has had an adverse impact on jobs. The reason why firms have not been hiring enough new workers is because they lack confidence in this Government's ability to set the UK on course for a sound economic recovery. There is now a real danger that young people will view minimum wage work as exploitative.

"Many of the businesses that are calling for the minimum wage to be frozen are also complaining about the lack of consumer spending. Boosting demand is vital - but this will not be achieved by squeezing the low-paid even further.

"Low-paid workers, like hairdressers, shop workers and care assistants, tend to spend 100% of any salary increase in their local economy, so a well-judged rise in the minimum wage would have a beneficial effect across the UK."

Alison Garnham, chief executive of Child Poverty Action Group, said: "This is another turn of the screw on families working hard in the lowest-paid jobs.

"When 58% of children who live in poverty have at least one working parent, low pay is clearly at the heart of the UK's child poverty problem.

"But from April, there will also be a further series of cuts to tax credits, which will hit many of the same families.

"With earnings falling behind inflation, the Chancellor's priority at the Budget must be to protect families struggling to make ends meet in poverty-pay jobs by postponing tax credit cuts until the universal credit comes in."

CBI policy director Katja Hall said: "Businesses will welcome the approach taken to this year's National Minimum Wage rates.

"The moderate rise in the adult rate and the freeze in the youth rates will come as a relief to the many hard-pressed firms right across the country.

"Retailers, care homes, hospitality, and other consumer-facing businesses are experiencing particularly tough conditions, so it's good that the LPC listened to the CBI's advice and made sure its recommendations preserve jobs and support the fragile recovery.

"The LPC also listened to businesses on the youth rates. With youth unemployment at its highest level for a generation, we must take great care not to price young people out of a job.

"Freezing the minimum wage will help reduce one of the barriers to employers deciding whether or not to take on a young person."

The YMCA questioned the freeze in the rate for young people.

Chief executive Ian Green said: "Many young people who have found themselves work have every right to feel pretty aggrieved by today's announcement.

"It seems illogical to argue that certain groups are entitled to an increase in the minimum wage whilst others are not and it is difficult to accept this inconsistency.

"The Government has made much of its belief that people in work should be better off than those who are not and should be supported, but today's announcement seems to go against this.

"Young people in work are facing the same rises in prices, such as fares on public transport, as the rest of the working population yet there is to be no mitigation of this as a result of this freeze."

PA

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