Minimum wage has not caused the intended 'ripple effect' of boosting wages and should be overhauled, says the man who first designed the policy

The Low Pay Commission is calling for an overhaul of the national minimum wage (Getty Images)

The national minimum wage needs to be overhauled to combat continuing problems of low pay and inequality across Britain, the architect of the policy said today.

The warning came from Professor Sir George Bain, the founding chairman of the Low Pay Commission, which was created to oversee the minimum wage. He said the current system had been successful but had “pretty much run its course”.

In a report for the Resolution Foundation think-tank, Sir George said the minimum wage had lifted most Britons out of poverty pay since its introduction 15 years ago.

However, it had not achieved the intended “ripple effect” of boosting wages higher up the salary scale.

He reported that many workers earn just above the minimum wage – currently £6.31 an hour for over-21s – while it had become the going rate in some sectors.

Sir George said some 1.2m workers were paid the wage, or within 5p of it, while another 1.4m earned within 50p of the rate.

He suggested the commission could recommend a higher minimum wage for more prosperous sectors or regions, without making it mandatory.

Another alternative could be to recommend a medium-term target for a substantially increased minimum wage, giving employers time to prepare for the new figure.

Sir George told the Financial Times: “The first objective is to get people into jobs. The second objective is to try to ensure that those jobs pay them sufficiently so they can maintain a decent standard of living.

The national minimum wage was introduced by the Blair government and was initially opposed by the Conservatives.

Last month George Osborne backed an above-inflation increase in its rate, arguing that it would reach £7 by 2015-16 if it had risen in line with inflation since 2008. His remarks echoed comments by Vince Cable, the Business Secretary.