Cross-party support for boosting the minimum wage

Modest increases in the UK national minimum wage (NMW) came into force on 1 October 2013. During the autumn political party conference season there were signs of growing support for increasing the NMW more substantially as the economy begins to recover. This is supported by the Trades Union Congress and, more cautiously, by the Confederation of British Industry. Business Secretary Vince Cable has also asked the Low Pay Commission to see how the NMW could be increased without damaging employment.

New national minimum wage rates

Modest increases in national minimum wage (NMW) rates came into force on 1 October 2013 (UK1304019I). These are:

  • GBP 6.31 (€7.53 as of 18 November 2013) for workers aged 21 and over, up from GBP 6.19 (€7.38) in 2012–2013;
  • GBP 5.03 (€6) (up from GBP 4.98 (€5.94)) for workers aged 18–20;
  • GBP 3.72 (€4.44) (up from GBP 3.68 (€4.39)) for 16–17 year olds, who are above the school leaving age but under 18;
  • GBP 2.68 (€3.20) (up from GBP 2.65 (€3.16)) for apprentices under 19, or over 19 if they are in the first year of their apprenticeship.

It is estimated that more than 890,000 of the UK’s lowest-paid workers will gain from these changes.

Tougher enforcement

The government has also introduced, again from 1 October 2013, a revamped enforcement regime under which employers who fail to pay the NMW are more likely to be publicly ‘named and shamed’. The Minister for Employment Relations and Consumer Affairs, Jo Swinson, said:

Paying less than the minimum wage is illegal. If employers break this law they need to know that we will take tough action. This is why I’m making changes so it is easier to name and shame employers who break the law. This gives a clear warning to rogue employers who ignore the rules that they will face reputational consequences as well as a fine if they don’t pay the minimum wage.

Political pressure for faster NMW increases

Over the summer and autumn of 2013 there have been indications of growing political support for increasing the NMW more substantially, reflecting concerns that the emerging economic recovery is failing to lift living standards for large parts of the workforce. Notably, the Liberal Democrat and Labour parties have indicated support for such a move, as have others including the Scottish Nationalists.

On 16 September, Vince Cable, the Secretary of State for Business, Innovation and Skills in the Conservative-Liberal Democrat coalition government, told the Liberal Democrats’ party conference that he had asked the independent Low Pay Commission (LPC), the body that advises the government on the NMW, to ‘advise how we might achieve a higher minimum wage without damaging employment.’ He elaborated on this in a statement issued by the Department for Business, Innovation and Skills (BIS) in which he said:

As signs of an economic recovery start to emerge, we need to do more to make sure that the benefits of growth are shared fairly across the board. […]. I am asking [the LPC] to extend their expertise to help the government and business understand how we can deal with the issue of low wages in the economy. In particular I have asked them to look at what economic conditions would be needed to allow the National Minimum Wage to rise in the future by more than current conditions allow.

This request extends the LPC’s previously announced remit from the government for its 2014 report, which is to:

  • ‘monitor, evaluate and review the levels of each of the different NMW rates and their impact, and make recommendations on the levels it believes should apply from October 2014’;
  • ‘review the contribution the NMW could make to the employment prospects of young people’.

Ed Miliband, leader of the opposition Labour Party, said in his speech to his party’s September 2013 annual conference that:

The minimum wage has been falling in value and we’ve got to do something about it…the next Labour government will strengthen the minimum wage to make work pay for millions in our country.

He added that Labour would ‘look at whether there are some sectors where we can afford a higher minimum’.

In a statement in late October, Alex Salmond, leader of the Scottish National Party (SNP) said that if Scottish independence from the UK is achieved in next year’s referendum, his party would guarantee a minimum wage that would rise ‘at the very least, in line with inflation’.

Social partner reaction

Social partner reaction to the various political statements on increasing the NMW has been mixed.

Frances O’Grady, General Secretary of the Trades Union Congress (TUC) said in a press release that NMW increases must be ‘bolder’ in the future, saying,

Years of below-inflation rises mean that the UK's lowest-paid workers are now facing an historic living standards crisis. As the recovery takes hold we will need to see far bigger increases to the minimum wage to ensure that ordinary people, and not just the super rich, benefit from economic growth. This will need more than any one off pre-election boost – we will need sustained stronger rises if the real value of the minimum wage is to be restored.

The Confederation of British Industry (CBI) welcomed Vince Cable’s move to refer the case for bigger increases to the LPC. CBI Director-General John Cridland commented in a press statement: ‘Given its strong track record on improving pay without impacting negatively on jobs, it is sensible to ask the [LPC] to review what more can be achieved as we return to growth.’

However, he was critical of the Labour Party leader’s proposals for a sectoral approach to setting a higher minimum wage, stating that this would be 'unworkable and hit smallest companies the hardest’.

Mark Hall, IRRU, Warwick Business School

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