Chancellor wants an above inflation rise in the minimum wage

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Business Secretary Vince Cable yesterday submitted the government’s final analysis on employment and the economy for the independent Low Pay Commission (LPC). The LPC will consider this as part of wider evidence when making its recommendations on National Minimum Wage (NMW) rates for this year.

Last September, the Business Secretary also asked the LPC to carry out an additional assessment of the economic conditions that will allow for faster increases in NMW rates without adverse effect on jobs. The government has also submitted its analysis in response to this work.

Business Secretary Vince Cable said: “The National Minimum Wage is designed to strike a balance between protecting the low paid and making sure they can find work. But as the economy starts to recover, the benefits of growth must be shared fairly.

“This is why last September I asked the independent Low Pay Commission what economic conditions would be needed to allow for significant rises in the National Minimum Wage without damage to employment. I am keen to use their expertise to understand what economic conditions would be needed to allow for rises in the wages of the low paid.”

The government’s evidence does not set out final policy. It forms part of the annual process for NMW rate setting, and is considered by the LPC’s expert panel alongside other evidence before they recommend new rates. Each year the government sets the LPC, which includes representatives from business, unions and academia, a remit to maximise the minimum wage without putting the jobs of low-paid workers at risk.

The evidence – as in previous years – provides analysis on the latest data for the labour market, pay levels, young people and wider economic issues. It does not make any recommendations regarding the level or direction for NMW rates. This is for the independent LPC to do when it reports back to government.

The government will publish the evidence shortly. The LPC is due to report back with NMW rate recommendations for 2014 and its additional assessment in Spring. The Business Secretary will consider these recommendations and make an announcement on rates and respond to the additional assessment shortly afterwards.

Commenting on the Chancellor’s announcement yesterday (Thursday) that he would like to see an above inflation increase in the minimum wage, TUC General Secretary Frances O’Grady said: “We welcome George Osborne’s acceptance of the TUC’s case for an above inflation rise in the minimum wage.

“But while this would help many, the Chancellor should be more ambitious about achieving decent pay rises across the whole of the UK workforce.

“The government should work with unions and employers to increase the spread of the living wage, lift the cap on public sector pay, and recognise that the wages of millions of workers across the economy have been falling in real terms and now need a decent increase.”

The CBI also esponded to the Chancellor’s comments on the national minimum wage. John Cridland, CBI Director-General, said: “Recommending the rate of the national minimum wage must be a matter for the Low Pay Commission, as the Chancellor recognises. An unaffordable rise would end up costing jobs and hit smaller businesses in particular.

“Any increase in wages must reflect improved productivity.”

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