An economic upturn ‘won’t help low paid’

We must re-establish the link between wages’ growth and GDP, says former Low Pay chief

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Indy Politics

Britain’s return to economic growth does not automatically mean the lowest paid workers will see their salaries rise, the former head of the commission responsible for the minimum wage says today.

Amid speculation that Ed Miliband will use his Labour conference speech to call for a dramatic hike in the minimum wage, Sir George Bain, the former chairman of the Low Pay Commission, says the Government must act to increase salaries to help five million people on low pay.

Speaking to the TUC last week, the Bank of England Governor, Mark Carney, said British workers will finally see a pay rise as productivity increases. But in an article on independent.co.uk, Sir George warns that the link between wages growth and GDP has weakened.

He says the minimum wage, which will be £6.50 from next month, should be set at 60 per cent of median earnings, which would equate to a significantly higher rate of about £7.80 an hour, with a “five-year ambition” for the rate so that businesses could plan ahead. Mr Miliband is expected to put wages at the heart of his major platform speech in Manchester later this month.

Sir George writes: “Mark Carney told the TUC conference that, as productivity increases, Britain will finally get a pay rise. Yet history tells us this is not always the case. In both Britain and the US the link between the growth of wages and GDP has weakened over the past few decades. In particular, there is a need to ensure that the lowest paid are benefiting as the economy recovers.”

When the national minimum wage was set up by the last Labour government, some jobs were advertised at £1 an hour, Sir George says. “The National Minimum Wage has been one of the most successful tools for tackling low pay. This extreme low pay was eliminated by the introduction of the minimum wage. And despite the concerns raised by many at the time that a minimum wage would cost jobs, the balance of evidence suggests there has been no adverse impact on employment.

“Yet the more general problem of low pay remains: one in five workers, or five million people, are low paid. I believe that the Low Pay Commission must evolve to meet this new challenge.” 

Sir George says the commission, which sets the annual rate of the minimum wage, should also have a broader remit and be the Government’s official watchdog on low pay.

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