Inadequate minimum wage isn't working, says its chief architect Sir George Bain

Professor Sir George Bain says the value of minimum wage has fallen because it hasn't kept pace with inflation

Political Editor

The national minimum wage is no longer working because its value has fallen, one of its key architects said as a new study showed it could be worth less in 2017 than it was in 2004.

The landmark measure, introduced by the Blair government 15 years ago this week, has dropped in value in real terms in the past five years after being pegged to wages, which have not kept pace with inflation.

Professor Sir George Bain, the first chairman of the Low Pay Commission which recommends the level of the minimum wage each year, told The Independent a “fresh approach” is needed  because it is not addressing today’s problems. He believes the priority is to help the 3.6 million people who are above the legal minimum but below the “living wage” needed for a basic standard of living. That is paid voluntarily by about 250 employers and is worth £7.45 an hour, or £8.55 an hour in London.

The minimum wage is currently set at £6.19 an hour and covers 1.1 million workers. It has usually risen in line with median pay, which has fallen behind inflation in recent years.

The study by the Resolution Foundation, a think tank campaigning for better living standards for the 15 million people on  low and middle incomes, predicts the legal floor would rise to £7.12 an hour in 2017 – the equivalent of £6.12 an hour in today’s prices and less than the £6.33 an hour it was worth in 2004. The prediction is based on Office for Budget Responsibility (OBR) forecasts for wage growth. The foundation says that would mean “13 lost years” in the fight against low pay.

Professor Bain said that from its launch in 1998 to 2007, the minimum wage abolished the worst excesses of low pay but struggled to help the group earning less than the living wage. The foundation’s study says the proportion of workers earning below about £7.50 an hour dropped only slightly, from 22 per cent to 21 per cent, over this period. At that rate, it would take the UK 70 years to reach the average rate of low pay in the 34 nations in the Organisation for Economic Co-operation and Development.

Professor Bain said: “In the early years of the minimum wage, we were successful in tackling some of the worst excesses of low pay and exploitation. This was our number one priority. The challenge for the next 15 years is much harder - how to help people earning above the minimum wage but below the living wage. Yet on current forecasts it looks like the gap between the minimum wage and the living wage could only widen in the coming years. Fresh thinking is going to be needed.”

The academic added: “Of course, this doesn’t just mean saying the minimum wage should rise regardless of the economic context, nor that you can impose a statutory living wage in such a varied labour market. But in other areas of economic policy, from inflation to public debt, the government is much clearer about the UK’s long-term goals - and we have bodies like the OBR to guide us. With low pay carrying such high social and economic costs – remember that the minimum wage brings savings for the public purse - we should be asking if it deserves a similar, more long-term and more systematic approach.”

The foundation estimates that if everyone were paid the living wage, the Government would save £2.2 billion a year through higher tax and national insurance receipts and lower spending on tax credits and benefits.

Professor Bain is chairing a review of the minimum wage for the foundation. It is considering whether the Government should make tackling low pay a clear long-term goal of economic policy, with the Low Pay Commission advising on how it would be achieved. One option is for the commission to give more “forward guidance” on how the legal floor might be raised to give business more time to adapt.

Ed Miliband, the Labour leader, is a supporter of the living wage and it has been introduced by some Labour councils. It is in line with his vision of “responsible capitalism” and boosting incomes rather than relying on expensive handouts like tax credits the state can no longer afford.

Although 2015 is likely to see a “living standards election,” the Labour manifesto is unlikely to pledge to impose a living wage on firms by legislation, as that could  cost jobs in some sectors. Labour could encourage its growth by restricting government contracts to firms paying it.

Since 2001, the campaign for a living wage has helped more than 45,000 employees and put more than £210 million into the pockets of the low paid. Boris Johnson, the Conservative Mayor of London, is another backer. He has said: “By building motivated, dedicated workforces, the living wage helps businesses to boost the bottom line and ensures that hard-working people who contribute to London's success can enjoy a decent standard of living."

Case study: ‘I work really hard but cannot afford the basic things’

Albeiro Ortiz is a 46-year-old cleaner originally from Colombia who works in London. Mr Ortiz is a member of the IWGB union.

I have worked as a cleaner at the Barbican Centre for the company MITIE for 40 hours a week – 6am to 2pm – since I first came to England two-and-a-half years ago.

In that time, there has been a big increase in the cost of living: rent, transport and everything is increasing but the minimum wage always remains low regardless. It feels really unjust – some people I work with have been earning the minimum wage for over eight years.

I used to buy two weeks-worth of food for around £40 and now that same £40 covers a week’s shop. We cannot buy the things we need, the things which are necessary.

I do an essential job and work really hard and should at least be able to afford the basic things in life with the salary I earn but it is just not possible. I have had to cut back on certain things. I always keep an eye out for food offers and can only afford to travel by bus, which I spend several hours a day on.

I wake up at 4am and get home from work at around 4pm, working an eight-hour shift. I then go to English classes which start at 6pm and I get home at 9.30pm and then I just have enough time to see my baby and get enough sleep for the next day.”

Sport
formula oneLive lap-by-lap coverage of championship decider
News
Boxing promoter Kellie Maloney, formerly known as Frank Maloney, entered the 2014 Celebrity Big Brother house
people
Arts and Entertainment
tvStrictly presenter returns to screens after Halloween accident
News
video
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
ebooksNow available in paperback
News
peopleFormer civil rights activist who was jailed for smoking crack cocaine has died aged 78
Arts and Entertainment
Jerry Hall (Hand out press photograph provided by jackstanley@theambassadors.com)
theatre
Arts and Entertainment
tv
Arts and Entertainment
Carrie Hope Fletcher
booksFirst video bloggers conquered YouTube. Now they want us to buy their books
Arts and Entertainment
Damien Hirst
artCoalition's anti-culture policy and cuts in local authority spending to blame, says academic
Sport
premier leagueMatch report: Arsenal 1 Man United 2
Arts and Entertainment
Kirk Cameron is begging his Facebook fans to give him positive reviews
film
News
i100
Life and Style
Small winemakers say the restriction makes it hard to sell overseas
food + drink
Arts and Entertainment
Jason goes on a special mission for the queen
tvReview: Everyone loves a CGI Cyclops and the BBC's Saturday night charmer is getting epic
Sport
Jonny May scores for England
rugby unionEngland 28 Samoa 9: Wing scores twice to help England record their first win in six
Life and Style
fashionThe Christmas jumper is in fashion, but should you wear your religion on your sleeve?
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

Reach Volunteering: Financial Trustee and Company Secretary

Voluntary Only - Expenses Reimbursed: Reach Volunteering: A trustee (company d...

Recruitment Genius: Senior Project Manager

£45000 - £65000 per annum: Recruitment Genius: This is a fantastic opportunity...

Recruitment Genius: Shopfitter

Negotiable: Recruitment Genius: This is an opportunity to join a successful an...

Recruitment Genius: Digital Sales Account Manager

£25000 - £30000 per annum: Recruitment Genius: A Digital Sales Account Manager...

Day In a Page

Mau Mau uprising: Kenyans still waiting for justice join class action over Britain's role in the emergency

Kenyans still waiting for justice over Mau Mau uprising

Thousands join class action over Britain's role in the emergency
Isis in Iraq: The trauma of the last six months has overwhelmed the remaining Christians in the country

The last Christians in Iraq

After 2,000 years, a community will try anything – including pretending to convert to Islam – to avoid losing everything, says Patrick Cockburn
Black Friday: Helpful discounts for Christmas shoppers, or cynical marketing by desperate retailers?

Helpful discounts for Christmas shoppers, or cynical marketing by desperate retailers?

Britain braced for Black Friday
Bill Cosby's persona goes from America's dad to date-rape drugs

From America's dad to date-rape drugs

Stories of Bill Cosby's alleged sexual assaults may have circulated widely in Hollywood, but they came as a shock to fans, says Rupert Cornwell
Clare Balding: 'Women's sport is kicking off at last'

Clare Balding: 'Women's sport is kicking off at last'

As fans flock to see England women's Wembley debut against Germany, the TV presenter on an exciting 'sea change'
Oh come, all ye multi-faithful: The Christmas jumper is in fashion, but should you wear your religion on your sleeve?

Oh come, all ye multi-faithful

The Christmas jumper is in fashion, but should you wear your religion on your sleeve?
Dr Charles Heatley: The GP off to do battle in the war against Ebola

The GP off to do battle in the war against Ebola

Dr Charles Heatley on joining the NHS volunteers' team bound for Sierra Leone
Flogging vlogging: First video bloggers conquered YouTube. Now they want us to buy their books

Flogging vlogging

First video bloggers conquered YouTube. Now they want us to buy their books
Saturday Night Live vs The Daily Show: US channels wage comedy star wars

Saturday Night Live vs The Daily Show

US channels wage comedy star wars
When is a wine made in Piedmont not a Piemonte wine? When EU rules make Italian vineyards invisible

When is a wine made in Piedmont not a Piemonte wine?

When EU rules make Italian vineyards invisible
Look what's mushrooming now! Meat-free recipes and food scandals help one growing sector

Look what's mushrooming now!

Meat-free recipes and food scandals help one growing sector
Neil Findlay is more a pink shrimp than a red firebrand

More a pink shrimp than a red firebrand

The vilification of the potential Scottish Labour leader Neil Findlay shows how one-note politics is today, says DJ Taylor
Bill Granger recipes: Tenderstem broccoli omelette; Fried eggs with Mexican-style tomato and chilli sauce; Pan-fried cavolo nero with soft-boiled egg

Oeuf quake

Bill Granger's cracking egg recipes
Terry Venables: Wayne Rooney is roaring again and the world knows that England are back

Terry Venables column

Wayne Rooney is roaring again and the world knows that England are back
Michael Calvin: Abject leadership is allowing football’s age-old sores to fester

Abject leadership is allowing football’s age-old sores to fester

Those at the top are allowing the same issues to go unchallenged, says Michael Calvin