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February 28, 2014

Proposed rise in minimum wage welcomed

Proposed rise in minimum wage welcomedThe Low Pay Commission (LPC) has recommended that the National Minimum Wage should be increased by 3% from October 2014. This would take the adult rate from £6.31 to £6.50 an hour.

In a letter to Vince Cable, David Norgrove, LPC chair said: "We have had to balance the risk of recommending more than business and the economy can afford, bearing in mind the pressures on low-paying sectors and small firms, against the risk of doing too little to start to restore the real value of the earnings of the lowest paid. We do believe however that the economic recovery should this year allow an increase in the real value of the minimum wage, the first increase for at least five years."

Norgrove also signaled that further above inflation rises would be recommended. He 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."

The current proposal has been welcomed by business groups. John Allan, national chairman of the Federation of Small Businesses (FSB), said: "The rise to £6.50 is slightly more than we would have hoped the Low Pay Commission would recommend, but is at least only 1% over inflation. Most small firms should be able to afford this."

Dr Adam Marshall, executive director of policy at the British Chambers of Commerce (BCC), described the proposal as a "reasonable compromise". He added: "As the economy continues to improve, businesses agree that the minimum wage must rise."

However, the prospect of future increases has divided opinion. John Allan said: "With talk of the rate increasing to £7 per hour before the end of the Parliament, the rate would have to rise by 7.6% next year. Some firms in certain industries are still struggling with rising costs. If the minimum wage were to increase by such a high margin next year, it would place significant pressure on these businesses."

The government has yet to confirm whether it will accept the recommendations. The BCC's Dr Adam Marshall said: "Ministers must follow the Low Pay Commission's carefully-evidenced recommendations, rather than ignore their independent advice and take a purely political decision."

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