Government must end six-year wage squeeze for lowest paid workers with a bold rise in the minimum wage

A bold rise in the national minimum wage (NMW) is needed next year to ease the living standards squeeze on the lowest paid workers, the TUC has warned today (Wednesday) in its submission to the Low Pay Commission (LPC).

The warning comes as the TUC has calculated that the annual salary of a full-time worker on the minimum wage would be £770 higher this year, had the NMW kept pace with price rises since 2007.

The TUC, which will present evidence to the LPC later this morning on next year’s minimum wage rates, says that the government must increase the minimum wage by more than the rate of inflation or average earnings growth to avoid putting even more financial strain on hard-working low-wage families.

Despite inflation currently running at 2.7 per cent, the government last month announced a minimum wage increase of just 1.9 per cent per cent for adults and 1 per cent for younger people. These small rises have meant a real-terms pay cut for around a million minimum wage workers, says the TUC.

The TUC will argue that with higher household spending power so vital towards building a sustainable economic recovery, too low an increase in the minimum wage would limit demand and put more strain on the public finances. When employers pay decent wages, government spending on in-work benefits and tax credits falls, whilst revenues are boosted as income tax and national insurance receipts rise.

The LPC expects that the 1.9 per cent increase in the minimum wage last month will generate an extra £183 million for the Treasury.

The TUC’s view is that as the long overdue economic recovery strengthens in future years, increases in the minimum wage should become more generous. A bigger increase in the minimum wage in 2014 is also needed to restore what has been ‘lost’ in recent years.

The TUC has strong concerns about the application and enforcement of the minimum wage, including the misuse of interns, the continued abuse of workers providing social care and the rapid growth in the use of zero hours contracts as a means to evade paying the minimum wage. The TUC wants the government to address these issues urgently.

TUC General Secretary Frances O’Grady said: “The recent minimum wage increase in October was actually a real-terms pay cut for hundreds of thousands of low-paid workers.

“With hard-working families all around the UK facing cuts to their benefits and tax credits, the minimum wage is becoming even more of a vital lifeline, and at the very least must keep pace with inflation and earnings.

“As the economic recovery strengthens there will be more capacity to increase minimum wage rates in 2014, and the government has a real chance to be more ambitious about raising the rates. Thousands of employers can easily afford to pay more than the legal minimum too, and should pay a living wage.

“It is also time to look at why certain sectors get stuck with so many low paid jobs and to try to help those industries to improve hourly pay rates.

“In addition, the TUC is also concerned about the rapid growth of zero hours contracts which effectively get employers around paying the minimum wage, and the continued misuse of interns and social care workers. The government must tackle this abuse now – there must be no hiding place for cheating employers.”

NOTES TO EDITORS

- The LPC is currently considering the rates to apply from 1 October 2014. The Commission will report to the government in February and the government will announce its decision in the Spring. As part of its evidence gathering programme, the Commission holds a two-day oral evidence session in November each year to quiz the TUC, CBI and others on their views on the development of the minimum wage in the following year.

- The LPC reports that the adult rate NMW has increased from £5.52 to £6.31 since 2007 (+14.3 per cent). The ONS CPI index of prices has increased by 21 per cent during the same period. If the 2007 NMW had increased by 21 per cent it would now be £6.68 ­– 37p higher than the actual rate in October 2013. A 40-hour per week full-time employee paid for 52 weeks a year is therefore £770 per week worse off than they would have been had the NMW kept pace with the CPI measure of inflation (0.37 x 40 x 52 = £769.60).

- The LPC estimate of savings to the Exchequer from this year’s NMW increase is provided in its 2013 report on p170 https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/226822/National_minimum_wage_Low_Pay_Commission_report_2013.pdf.

- The TUC’s LPC submission is available under embargo at www.tuc.org.uk/LPCsubmission2013  - The current minimum rates (from 1 October 2013):

£6.31 – adult aged 21 or above

£5.03 – aged 18-20

£3.72 – aged 16-17 (16-year-olds above statutory school leaving age only)

£2.68 – apprentices aged under 19, or over 19 but still in the first twelve months of an apprenticeship. All other apprentices must be paid the relevant age-based rate.

 - The TUC’s campaign plan can be downloaded from www.tuc.org.uk/campaignplan

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

- Follow the TUC on Twitter: @tucnews

- The Pay and Work Rights Helpline offers further advice on the NMW, and how it can be enforced:  https://www.gov.uk/pay-and-work-rights-helpline ; 0800 917 2368

Contacts:

Media enquiries:
Liz Chinchen   T: 020 7467 1248    M: 07778 158175    E: media@tuc.org.uk
Rob Holdsworth    T: 020 7467 1372    M: 07717 531150     E: rholdsworth@tuc.org.uk