08 March 2007
National Minimum Wage rises for a million workers
The Independent Low Pay Commission has recommended a new rate of £5.52 an hour. More than a million workers, two thirds of them low paid women will benefit from the rise from £5.35 to £5.52 an hour from October, Alistair Darling Secretary of State for Trade and Industry announced on March 7th.
Darling has accepted the level recommended by the Commission, which will also mean increases from £4.45 to £4.60 for 18-21 year olds, and from £3.30 to £3.40 for 16-17 year olds.
Both the CBI and the EEF have welcomed the decision.
The announcement means the minimum wage has gone up by almost 30% more than inflation since it was introduced in 1999, with the number of jobs increasing by almost 2m in the same time. Since October last year the minimum wage for adults, combined with Working Tax credits and other benefits, has guaranteed an income of at least £268 a week for families with one child and one full-time worker.
Darling said: “More than a million workers, two thirds of them low paid women will benefit from this announcement. It means the minimum wage has gone up by almost 30% more than inflation since 1999, with the number of jobs in the economy increasing by almost 2m in the same period. It is right for workers and employers.
“Just 10 years ago home workers could be paid as little as 35p an hour, cleaners £1.30 an hour and security guards £2.25 an hour. It's bad for families and just plain wrong.
“I am proud of the minimum wage, proud of how it is helping families and proud of the role it plays in the modern economy we are delivering.”
In January new measures came into force to back the minimum wage with tougher enforcement. These include:
- A typical penalty for underpaying a single worker is now more than £200.
- Employers who fail to pay the minimum wage can face prosecution, risking a criminal record and a £5,000 fine.
The CBI welcomed this as ‘a good decision for the economy’. John Cridland, CBI deputy director-general, said: “With interest rates and inflation rising, this is not the year for unaffordable wage increases. Last week the Chancellor made sensible decisions on public sector pay, today Government has applied that same caution to the private sector.
“The CBI had called for business to receive some relief this year. The Minimum Wage increase has exceeded average earnings growth since 2003, causing it to have a disproportionate impact in sectors such as retail and hospitality, and undermining pay and employment policies within many firms.
“These same businesses have faced big increases in energy and pensions costs, and for many this October will see an increase of four days' paid holiday.
“The Minimum Wage has brought real benefits to many lower paid workers, but it is right that this year's increase took account of business reality.”
And EEF, the manufacturers’ organisation, also welcomed the announcement of a modest increase, which takes into account the significant increase in costs that many employers paying the NMW will face in October 2007 when the first stage of the increase in statutory annual holiday entitlement is implemented. The Government will also need to take into account the additional costs that many of these employers will face in 2012 when they have to make contributions into the new personal accounts pension scheme for employees who decide to join this scheme.
However, EEF is disappointed that the Government has again missed the opportunity to provide manufacturers with greater certainty about the impact of the NMW on their businesses by failing to base increases on a pre-determined formula. In its evidence to the Low Pay Commission, EEF has consistently argued that future increases in the NMW should be determined by a formula based on movements in basic rates of pay across the economy. This would then enable manufacturers to plan for the resultant impact that these increases will inevitably have on their costs and remuneration structures through the need to maintain pay differentials.
Commenting on today’s announcement, David Yeandle, EEF deputy director of employment policy, said: “We are pleased that the Government has recognised the additional costs that many employers paying the NMW will face when statutory annual holiday entitlement increases in October 2007. Whilst manufacturers will welcome this modest increase in the NMW, they continue to believe that future increases should be based on a pre-determined formula. They are disappointed that, yet again, the Government has missed the opportunity to provide them with greater certainty about the future impact of the NMW on their businesses which would enable them to plan accordingly.”
However, commenting on the announcement, Liberal Democrat Shadow Trade and Industry Secretary, Susan Kramer MP attacked the current system for giving less protection to younger workers.
She said: “This decision will create an even bigger income gap between younger workers and the rest. Workers aged under 22 deserve to be paid the same as their older colleagues.”
EEF (Engineering Employers Federation)
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