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Low Pay Commission Inquiry 2016

Issue date

Download Low Pay Commission Inquiry 2016 - TUC response (PDF)

This paper sets out our evidence to the Low Pay Commission’s summer 2016 inquiry.

Our submission examines:

  • The current economic situation and the prospects for 2017, which is the period that the LPC’s next recommendations will cover.
  • The case for further increase in the minimum wage rates, taking into account both economic prospects, the political imperative set by the government’s national living wage target, and the Commission’s goal of helping younger workers to the fullest extent that can be sustained.
  • The need to keep building awareness and enforcement of the minimum wage in a context where the rates will be higher and more workers will be covered.

In formulating our recommendations, we have taken account of the following key points:

  • The decision to leave the European Union has clearly led to significant economic uncertainty. The TUC has welcomed the action taken so far by the Bank of England and the Government. We have also argued that we need an immediate action plan to ensure that workers do not pay the price of the decision to leave, including action on infrastructure investment, immediate help for industry, and a renewed industrial strategy.
  • The plan also urges government to continue to make progress on wages for the lowest paid. We note that the TUC’s view that wages growth is vital for supporting economic demand has once again become the orthodoxy, being echoed by the IMF as well as the ILO.
  • Prior to the EU referendum the UK continued to see strong employment growth, particularly in low paid sectors. Last year the growth of employee numbers in the low pay sectors outstripped the increase for the whole economy. Other economic indicators were also robust.
  • The TUC therefore believes that now is the time for the LPC to hold its nerve and contribute towards the drive to maintain economic growth, which must include wages growth.  

There will obviously be some siren voices urging the Commission to be more cautious at this point but we should remember that at the moment that key economic indicators on employment and growth are still strong. We note that corporate profitability is now at record levels, so it would be hard to argue that this country cannot afford a pay rise for its lowest paid workers.

Premature pessimism risks becoming a self-fulfilling prophecy that would leave too many workers stuck in poverty pay and curtail their spending, which is needed to keep the economy growing. We will watch the economic indicators closely, but note that the Government retains discretion over whether to implement the Commission’s recommendations in April 2017. There is always a force majeure safety valve that should be seen as insuring the Commission against any imperative towards over-caution.

The LPC should recommend a further programme of work to ensure that the NMW is fully enforced. This is needed in order to counter the public perception that employers can flout the law with impunity in a climate where insecure work has become much more common. Steady increases in funding, more inspectors, proactive work and naming and shaming will all need to be rolled out.

There must also be a workable prosecution strategy that takes a steady stream of the worst employers through the courts and punishes them with substantial fines.

The current inquiry is an opportunity for the LPC to help to set the narrative for the next period of life in the UK. A positive narrative should necessarily include a rising minimum wage that helps more people, which combined with decent wages growth more broadly, would help to keep the economy moving forward.

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