Low Pay Commission recommends 3% minimum wage increase

The Low Pay Commission has recommended a 3% increase in the national minimum wage (NMW). It said that the lowest earners are now earning more, relative to other workers, than they have been for decades.

Publishing an executive summary of its 2014 report, the commission endorsed the increase, saying that the economic recovery should this year allow firms to afford the increase. This is despite previous hesitance to recommend such measures due to fears of straining small businesses.

Business secretary Vince Cable said that if the proposals, which would see the NMW set at £6.50, were accepted by parliament, it would be the first increase in real terms since 2008.

Although Labour welcomed the proposals, the party said that more needed to be done to tackle to “cost of living crisis”.

The chancellor George Osborne said last month that the UK could afford to increase the NMW to £7.00, but Labour responded by saying that proposals show that Osborne’s claims were “misleading and empty rhetoric”.

The party’s shadow business secretary Chuka Umunna said, “As well as a higher minimum wage, we need action now to earn our way out of the cost-of-living crisis like Labour’s plans to incentivise the living wage and expand free childcare for working parents. But all the Tory-led government can offer is empty promises and rhetoric.”

The LPC has also said that if the economy continues to recover, further increases could be in the pipeline.

David Norgrove, chair of the LPC said, “Provided the economy continues to improve we expect to recommend further progressive real increases in the value of the minimum wage, restoring and then surpassing its previous highest level, so that 2014 will mark the start of a new phase – of bigger increases than in recent years – in the work of the commission.”

A report by KPMG last year found that around one in five workers were being paid less than the living wage, an informal benchmark which is said to be enough for workers to afford essentials.

The living wage is currently set at £8.80 in London and £7.85 elsewhere, and was encouraged by investors last year in an open letter to the companies they invest in. They claimed that paying the living wage increases the quality of workforce and decreases absence and sickness.

The government’s report on the NMW is expected to be formally released in the coming weeks.

Further reading:

Economy ‘can now afford’ a minimum wage rise, says Osborne

Investors to UK firms: paying living wage helps achieve ‘longevity and productivity’

KPMG report: one in five workers paid less than living wage

Only Labour can rebuild middle class, says Miliband

UKIP’s Nigel Farage: ‘there are more important things than money’