Election 2015: Ed Miliband targets minimum wage for maximum gain

Labour promises five years of increases to close gap on average earnings - and puts reversing inequality at heart of election strategy

Labour will pledge today dramatically to increase the minimum wage paid to millions of low-income workers in the biggest shake-up of the scheme since its inception.

Under plans to be set out by Ed Miliband, Labour will commit itself to raising the minimum wage significantly faster than growth in average pay over five years if the party wins the next election.

Currently, the minimum wage is just 53 per cent of median earnings and has fallen by 5 per cent in real terms since 2010. Labour pledged that its target for increasing the minimum wage would help to reverse years of growing income inequality.

But the move will lay Mr Miliband open to charges from the Conservatives that he is taking a dangerously interventionist approach to wages that could damage economic growth and lead to rises in unemployment.

Labour badly needs to reignite support, with recent polls showing the party has slipped behind the Tories.

Read more: Ed Miliband sells ‘fairer’ Britain to voters

Labour is also backing proposals to set sector-by-sector minimum wages – so that minimum hourly rates of pay could be higher in some jobs than in others. Under current arrangements, the minimum wage – which is due to rise to £6.50 in October – is set by the independent Low Pay Commission, which is made up of representatives of industry, unions and academics.

It is tasked with striking a balance between the need for wage growth and concerns about the impact on employment and economic growth.

But Labour believes that the commission has been too cautious in setting the minimum wage.

A third of all women in work, nearly two-fifths of 16- to 30-year-old employees and 43 per cent of part-time workers are now characterised as low-paid. Under Labour’s plans, which will be set out with the publication of a report into low pay by Alan Buckle, the deputy chair of the consultancy firm KPMG, the remit of the commission would be significantly strengthened.

It would be given a five-year target to reduce the gap between national median pay and the minimum wage – in a similar way that the Government sets the Bank of England an inflation target.

While Labour will not  commit itself to an exact  level until closer to the election, party sources said it would be ambitious. The party claims the policy will benefit the Exchequer through reduced spending on in-work benefits and higher tax receipts. The Government currently spends more on benefits and tax credits for families in work than it does on unemployed families at a cost of around £3.2bn.

Under the plan, if the commission felt it could not meet the target, it would have to write to ministers explaining and justifying its position.

“Policymakers should set the target to be stretching rather than easy, aiming to make a significant difference to people’s lives and to put pressure on businesses to adapt their business models, to chart a course to a higher-wage, higher-skills economy,” the report concludes.

It also suggests that the Low Pay Commission should be allowed to set sector-by-sector minimum pay – and launch investigations to improve productivity in those areas of the economy that are particularly affected by low wages.

Those industries, the report suggests, that might be able to pay higher minimum wages include IT, construction, business and financial services.

Areas of the economy such as hospitality, care work  and the service sector could have slower increases in the minimum wage – but with a focus by the commission on driving long-term productivity gains that could allow  wage increases.

“The evidence suggests the need for a more intelligent approach that puts more pressure on sectors that could afford to pay more, and also supports low-paying sectors to tackle low pay and low productivity,” Mr Buckle says in his report.

“The comparison with other countries also suggests that ambitious wage floors can provide an effective incentive for employers to move towards higher-skill, higher-wage business models.”

Launching the report today Mr Miliband will point out that it was a Labour government that first introduced the minimum wage but the party now needs to “go further” to “make work pay”.

“Britain is still one of the lowest-paid countries among the world’s advanced economies,” he will say. “So we have to go further. We have to restore the link between hard work and building a decent life for your family.

“A Labour government  will establish a clear link between the level of the minimum wage and the scale of wages paid to other workers in our economy.”

The Buckle report rejects calls by campaigners for Labour to introduce a mandatory living wage but says all central government departments should ensure that their subcontractors pay the living wage to any staff working on government contracts. It also rules out setting a separate minimum wage for London, arguing it would exacerbate existing inequalities.

PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
ebooksAn unforgettable anthology of contemporary reportage
Voices
voicesBryony Beynon: This is something every woman can relate to
Arts and Entertainment
film

News
Mock the tweet: Ukip leader Nigel Farage and comedian Frankie Boyle
peopleIt was a polite exchange of words, as you can imagine
Arts and Entertainment
Steven, Ella Jade and Sarah in the boardroom
tv
Life and Style
fashion
Life and Style
Britons buy more than 30 million handsets each year, keeping them for an average of 18 months
tech
Arts and Entertainment
Benedict Cumberbatch is reported to be in final negotiations to play Doctor Strange for Marvel although the casting has not yet been confirmed
film
News
people
Arts and Entertainment
Alloysious Massaquoi, 'G' Hastings and Kayus Bankole of Young Fathers are the surprise winners of this year's Mercury Music Prize
musicThe surprise winners of the Mercury Prize – and a very brief acceptance speech
Arts and Entertainment
TV Presenters Ant McPartlin and Dec Donnelly. Winners of the 'Entertainment Programme' award for 'Ant and Dec's Saturday Night Takeaway'
musicAnt and Dec confirmed as hosts of next year's Brit Awards
Arts and Entertainment
Orson Welles made Citizen Kane at 25, and battled with Hollywood film studios thereafter
film
Life and Style
fashion

World Beard and Moustache Championships held last week

News
video
Arts and Entertainment
Copycat culture: the Chateau Zhang Laffitte in China, top, and the building which inspired it, in Paris, bottom
architectureReplicas of Western landmarks are springing up in unlikely places
Sport
Rolando Aarons watches as his effort finds the corner of the Manchester City goal to give Newcastle the lead
footballManchester City 0 Newcastle 2: Holders crash out on home turf
News
i100
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

English Teacher

£100 - £125 per day: Randstad Education Chelmsford: English Teacher - Saffron ...

Primary Supply Teacher - Northants

£90 - £130 per day: Randstad Education Leicester: Primary School Supply Teache...

Maths Teacher

£21000 - £35000 per day: Randstad Education Chelmsford: Maths Teacher - Saffro...

Chemistry Teacher - Top School in Malaysia - January Start

£18000 - £20400 per annum + Accommodation, Flights, Medical Cover: Randstad Ed...

Day In a Page

Isis in Syria: A general reveals the lack of communication with the US - and his country's awkward relationship with their allies-by-default

A Syrian general speaks

A senior officer of Bashar al-Assad’s regime talks to Robert Fisk about his army’s brutal struggle with Isis, in a dirty war whose challenges include widespread atrocities
‘A bit of a shock...’ Cambridge economist with Glasgow roots becomes Zambia’s acting President

‘A bit of a shock...’ Economist with Glasgow roots becomes Zambia’s acting President

Guy Scott's predecessor, Michael Sata, died in a London hospital this week after a lengthy illness
Fall of the Berlin Wall: History catches up with Erich Honecker - the East German leader who praised the Iron Curtain and claimed it prevented a Third World War

Fall of the Berlin Wall

History catches up with Erich Honecker - the East German leader who praised the Iron Curtain and claimed it prevented a Third World War
How to turn your mobile phone into easy money

Turn your mobile phone into easy money

There are 90 million unused mobiles in the UK, which would be worth £7bn if we cashed them in, says David Crookes
Independent writers remember their Saturday jobs:

Independent writers remember their Saturday jobs

"I have never regarded anything I have done in "the media" as a proper job"
Lyricist Richard Thomas shares his 11-step recipe for creating a hit West End musical

11-step recipe for creating a West End hit

Richard Thomas, the lyricist behind the Jerry Springer and Anna Nicole Smith operas, explains how Bob Dylan, 'Breaking Bad' and even Noam Chomsky inspired his songbook for the new musical 'Made in Dagenham'
Tonke Dragt's The Letter for the King has finally been translated into English ... 50 years on

Buried treasure: The Letter for the King

The coming-of-age tale about a boy and his mission to save a mythical kingdom has sold a million copies since it was written by an eccentric Dutchwoman in 1962. Yet until last year, no one had read it in English
Can instilling a sense of entrepreneurship in pupils have a positive effect on their learning?

The school that means business

Richard Garner heads to Lancashire, where developing the 'dragons' of the future is also helping one community academy to achieve its educational goals
10 best tablets

The world in your pocket: 10 best tablets

They’re thin, they’re light, you can use them for work on the move or keeping entertained
Lutz Pfannenstiel: The goalkeeper who gave up Bayern Munich for the Crazy Gang, Bradford and a whirlwind trawl across continents

Lutz Pfannenstiel interview

The goalkeeper who gave up Bayern Munich for the Crazy Gang, Bradford and a whirlwind trawl across continents
Pete Jenson: Popular Jürgen Klopp can reignite Borussia Dortmund’s season with visit to Bayern Munich

Pete Jenson's a Different League

Popular Klopp can reignite Dortmund’s season with visit to Bayern
John Cantlie video proves that Isis expects victory in Kobani

Cantlie video proves that Isis expects victory in Kobani

The use of the British hostage demonstrates once again the militants' skill and originality in conducting a propaganda war, says Patrick Cockburn
The killer instinct: The man who helps students spot potential murderers

The killer instinct

Phil Chalmers travels the US warning students how to spot possible future murderers, but can his contentious methods really stop the bloodshed?
Clothing the gap: A new exhibition celebrates women who stood apart from the fashion herd

Clothing the gap

A new exhibition celebrates women who stood apart from the fashion herd
Fall of the Berlin Wall: Goodbye to all that - the lost world beyond the Iron Curtain

The Fall of the Berlin Wall

Goodbye to all that - the lost world beyond the Iron Curtain