Increases in national minimum wage announced

In March 2003, the UK government announced that, as recommended by the independent Low Pay Commission, the adult rate of the national minimum wage will be increased in October 2003 to GBP 4.50 per hour, with the rate for 18-21 year olds rising to GBP 3.80.

On 19 March 2003, the Department of Trade and Industry (DTI) announced that the adult rate of the national minimum wage (NMW) (UK9904196F) will be increased from GBP 4.20 to GBP 4.50 per hour from 1 October 2003, and that the 'development rate' for 18-21 year olds will rise from GBP 3.60 to GBP 3.80, in accordance with recommendations made by the independent Low Pay Commission (LPC). The government has also provisionally accepted the Commission’s recommendation that the two rates should be further increased to GBP 4.85 and GBP 4.10 respectively in October 2004. The LPC has asked for a remit from the government to 'fine-tune' the recommended October 2004 upratings, enabling it to consider whether its recommendations 'remain appropriate in the light of economic circumstances'.

Commenting on the increases, Adair Turner, who chairs the LPC, said: 'We have recommended significant increases in minimum wage rates, above the forecast increase in average earnings. All the signs are that the minimum wage can be increased without producing damaging economic effects. This implies a series of increases above average earnings over a number of years, gradually increasing the number of people benefiting. But there is also a need for caution in economic circumstances which could prove difficult.'

Among other recommendations made in its fourth report, the LPC says that:

• 21 year olds should receive the adult rate of the NMW and the age coverage of the youth development rate should be kept under review (as previously - UK0207102N- this recommendation has been rejected by the government);

• the government should ask the Commission to consider in detail the introduction of a NMW rate for 16-17 year olds and to report by February 2004, so that a rate could be introduced by October 2004; and

• the government should take further steps to raise awareness of the NMW rates, particularly among small businesses, and there should be further enforcement initiatives to improve compliance.

Reacting to the announced increases, the Confederation of British Industry (CBI) said that it 'accepted' the increase to GBP 4.50 but had argued that any higher figure could 'price people out of work and create pressure for increases in higher wage levels'. On the increase planned for October 2004, the CBI commented: 'This is a substantial hike and the jury is rightly still out on whether it would be sustainable.'

The Trades Union Congress (TUC) said in a statement: 'The low paid will be disappointed that the Low Pay Commission has not accepted union calls for the minimum wage to be raised to GBP 5.00 next year. The continuing evidence that the minimum wage has had little or no negative impact on employment would have justified such an increase. But the rise is still significantly above inflation, and the Commission has made it clear that subsequent increases in the minimum wage should continue to be above inflation. This commits the employer representatives to a minimum wage strategy that will continue to bear down on poverty in work.'