Minimum wage increase would boost economy, says union

Nick Elvin

Raising the national minimum wage by £1.50 an hour is affordable and would bring a much-needed stimulus to the economy, according to a new report.

The independent report, commissioned by the Unite union, claims that a £1.50 increase in 2015 would benefit 4.6 million low-paid workers, and the average net gain from the extra pay would be £1,400 per year gross.

It would also add £2.1 billion to the public finances and could generate at least 30,000 new jobs.

When the increase is analysed by employment sector, the biggest winners would be workers in the retail sector where it is estimated more than 900,000 would see a significant increase in their wage packets. In the hospitality industry 750,000 would benefit, while 190,000 cleaners would see a boost to their incomes.

The report was written by economist Howard Reed, formerly of the Institute for Fiscal Studies. It was submitted by Unite last week to the Low Pay Commission – the body charged with considering the annual increase in the national minimum wage – in response to its consultation on the minimum wage.

Commenting on the report, Mr Reed said: “These findings show that a £1.50 per hour increase can only be a good thing for the economy. An increase would lift millions of low paid people out of poverty while at the same time it would increase income for the Treasury, which has seen tax receipts from employment drop, fuelling an increase in government borrowing. It would also create new jobs making it a case that is difficult to argue against.”

Earlier this year, the Government announced a rise in the hourly minimum wage from £6.31 to £6.50, which comes into effect this month. This figure is still short of what economists agree is the living wage: £7.65 per hour (£8.80 in London).

Len McCluskey, general secretary of Unite said: “We have long argued for an immediate uplift in the minimum wage of £1.50 to get people out of poverty and get some real growth into our economy, not this phoney one fuelled by a housing bubble. This report shows that this is both affordable for employers, would in fact create not cost jobs, and is a great deal for the national finances. It need not be put off any longer.

“Millions of working people have seen their income reduce by an average of £1,600 during the life of this government as they work harder but get poorer. They deserve a better deal from our country and only a lack of political will is preventing them from getting one.”