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- Nick Elvin
The Low Pay Commission (LPC) has recommended to the Government that the adult rate of the National Minimum Wage should rise from £6.50 to £6.70 from October 2015.
With inflation now forecast at 0.5%, this recommended rise of 3% would, if accepted by the Government, be the largest real-terms increase in the NMW since 2007, taking its estimated real value three-quarters of the way back to its highest ever level. The LPC says the recommendation takes into account a forecast of lower costs for business in fuel and energy, a strong economic performance and a significant recovery in earnings.
David Norgrove, chair of the LPC said: “Last year we were pleased to recommend the first real terms increase in the value of the minimum wage since the recession. We argued that the minimum wage had proved its worth over the course of the slowdown, increasing relative to earnings generally and protecting the low paid during the downturn in a way not seen before albeit, as with wages for all other workers, its real value fell.
“Sharp increases in the minimum wage would put jobs at risk – not least bearing in mind pressure on low-paying sectors and small firms. We do believe however that the continued recovery, and in particular the impressive growth in employment of the low paid, should this year allow a further increase in the real and relative value of the minimum wage.
“An increase of 3% to £6.70 is a larger real terms increase than last year and, on the basis of the most recent Bank of England inflation forecast, should restore three-quarters of the fall in the real value of the NMW relative to its peak in 2007.”
The adult rate of the National Minimum Wage applies to workers aged 21 and over. The LPC has also recommended an increase to £5.30 in the youth development rate, which applies to 18- to 20-year-olds, and an increase to £3.87 in the 16- to 17-year-old rate. Also recommended is an increase to £2.80 in the apprentice rate, which applies to all apprentices in year one of an apprenticeship, and 16- to 18-year-olds in any year of an apprenticeship.
Commenting on the LPC’s recommendations, CBI director general, Katja Hall said: “The LPC has struck a careful balance. As the economic recovery cements, the Commission has reconciled a desire to reflect this in pay packets while recognising that productivity growth – the key to sustainable pay rises – remains weak.
“We welcome the commitment to review next year’s rise if the improved business environment doesn’t materialise.”
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