date: 17 March 2009

embargo: 00.01hrs Wednesday 18 March 2009

TUC tells Low Pay Commission business calls for a wage freeze are unfair and unnecessary

An increase in the national minimum wage (NMW) is both necessary and affordable, the TUC is advising the Low Pay Commission (LPC) today (Wednesday), as it decides the rate for the minimum wage from October 2009.

The TUC is strongly opposed to calls from business for the LPC to freeze the NMW during the recession as, with inflation predicted to rise during the current NMW year (October 2009-September 2010), any freeze would cause a fall in the real living standards of low paid workers.

Most people's wages continued to increase during previous recessions and rises were consistently ahead of inflation, says the TUC. A freeze in the NMW would mean that low paid workers would fall behind the rest of the working population, as average earnings are expected to rise by 2.7-2.8 per cent during the period that will be covered by the next LPC recommendation.

The TUC believes an increase to the NMW would be easily affordable to the economy, even during the downturn. For example, a NMW increase of 20p per hour would amount to an increase of just 0.06 per cent of the current UK pay bill.

A boost in the NMW would also help to stimulate consumer spending, says the TUC. Low paid workers tend to spend nearly all of their NMW increases in the local economy. For example, a 20p per hour increase in the NMW would generate around £400 million worth of extra spending, which would help offset the cost of the increase.

TUC General Secretary Brendan Barber said: 'It is entirely predictable that employer groups are saying that an increase in the minimum wage will threaten jobs, and that it should be frozen during the recession.

'However, raising the minimum wage has already helped thousands of families without causing significant job losses. The effect of a further reasonable increase on employer pay bills will be modest, and companies should find them easy to absorb.

'The recession was caused by very highly paid people damaging the nation's financial system. It would not be fair to make the low paid suffer a freeze in wages while city bankers still get bonuses, and when there is no economic necessity to do so.

'The Low Pay Commission should robustly reject employer scare-mongering and recommend the highest minimum wage increases that can be sustained.'

NOTES TO EDITORS:

- The adult NMW is currently £5.73 an hour. Workers aged 18-22 receive £4.77 and those aged 16 and 17 get £3.53.

- The low pay sectors make up about a quarter of the economy. Sectors with a high incidence of low paid jobs include; retail, hotels, catering, bars, textile manufacturing, hairdressing, cleaning, security, agriculture, food processing.

NMW employees as a percentage of industry pay bill and effect of a 20p increase:

Industrial sector

Number of employees (thousands)

Mean annual gross pay per employee (£)

Total pay (£ million)

Per cent minimum wage workers

Minimum wage pay as a percentage of industry pay bills

Per cent increase in total industry pay bill stemming from a 20p increase in the NMW

Agriculture, hunting and forestry

257

20,366

5,234

4.3%

2.4%

+0.08%

Textile, clothing and leather goods manufacture

98

20,909

2,049

9.5%

5.1%

+0.20%

Retail trade (not motor vehicle)

2,759

15,126

41,733

7.5%

4.3%

+0.14%

Hotels and restaurants

1,774

14,929

26,484

17.2%

10.2%

+0.36%

Social work activities

1,184

16,154

19,126

5.1%

2.9%

+0.10%

Investigation and security services

176

22,139

3,896

4.0%

2.4%

+0.10%

Industrial cleaning

456

12,129

5,530

19.3%

12.0%

+0.40%

Hairdressing and other beauty treatment

127

11,588

1,472

22.2%

16.9%

+0.54%

All GB jobs

26,400

26.020

686,400,528

4.7%

1.8%

+0.06%

Sources: TUC estimates using ONS Annual Survey of Hours and Earning 2008 table 16.6a (hourly pay excluding overtime), ONS Economic and Labour Market Review, March 2009, table 6.05, LPC Report 2008 fig 2.1. Assumptions: Employer on costs are not included as for the purposes of this estimate they are assumed to be distributed equally throughout the pay bill, and this not to affect the ratio of NMW pay to general pay. It also assumes that all workers in an industry work average hours. It therefore takes no account of the disproportionate amount of part-time workers who benefit from the NMW. This estimate assumes that all NMW workers earn the adult rate. Furthermore it also ignores those who are currently paid just above the minimum wage who may gain a pay rise as a result of an increase in the rate.

Economic indicators 2008-2010

Whole year 2008 forecast

2009 forecast

2010 forecast

Average Earnings Index

3.5

2.7

2.8

CPI Inflation

3.3

0.3

1.6

RPI inflation

2.7

-1.9

2.1

Sources: HMT roundup of independent economic forecasts for the UK Economy (July 2008) for 2008/2009 median forecasts made in the last three months. The latest forecasts for 2010 were published in HMT's May roundup.

- On Saturday 28 March the TUC will be part of the huge Put People First platform which is made up of some 100 unions, development agencies, domestic poverty, faith and environmental groups. The alliance plans to tell world leaders attending the G20 summit - happening just five days afterwards on Thursday 2 April - that only just, fair and sustainable policies can lead the world out of recession.

- Put People First - March for Jobs, Justice and Climate will start from the Embankment and culminate in a rally in Hyde Park. It will demand decent jobs and public services for all, an end to global poverty and inequality, and a green economy.

- All TUC press releases can be found at www.tuc.org.uk

- Register for the TUC's press extranet: a service exclusive to journalists wanting to access pre-embargo releases and reports from the TUC. Visit www.tuc.org.uk/pressextranet

Contacts:

Media enquiries:
Liz Chinchen T: 020 7467 1248 M: 07778 158175 E: media@tuc.org.uk
Elly Brenchley T: 020 7467 1337 M: 07900 910624 E: ebrenchley@tuc.org.uk

Press release (1,000 words) issued 18 Mar 2009

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