Minimum wage should rise by 3%, says Low Pay Commission

Raising the minimum wage by 3% would be the optimum course of action to ensuring that businesses can afford higher monthly outgoings and worker wages pick up in real terms, the Low Pay Commission has identified.
The advisory body recommended that the government should raise the minimum wage to £6.50 an hour, which if pursued by the government, would see wages rise in real terms for the first time since 2008.
 
Nevertheless, the rise would only see minimum wage workers wages be 19p higher than the £6.31 value it has been at since the start of 2013, and doubt has been cast on whether the move will suffice, considering the endemic personal debt problems plaguing the country at present.
The LPC highlighted that they have had to take into consideration the financial wellbeing of the countryís businesses as well as real worker wages, but did identify that they would begin to implement more substantial rises if the economy continues recovering at its present rate. 
“Provided the economy continues to improve, we expect to recommend further progressive real increases in the value of the minimum wage, restoring and then surpassing its previous highest level, so that 2014 will mark the start of a new phase – of bigger increases than in recent years,” said commission chairman, David Norgrove.
‘Restore the value lost over recent yearsí
The Low Pay Commission reportís suggestions would see worker wages rise at a rate higher than inflation for the first time since 2008, in a move that will look to address the ongoing cost of living crisis that Britons have been faced with in recent times.
Due to a persistent rise in inflation at a rate faster than the upwards movement in worker wages, the real value of an employeeís take home pay has diminished in the past 5 years, and they have had to face higher outgoings, with an essentially lower income. 
This reality has prompted many spectators to brandish the country as being in a ëcost of living crisisí, where workers wages are constantly being ësqueezedí by higher financial demands, without having a course of action to improve the complexion of their salary. 
And both government and opposition ministers have praised the move for being a step in the right direction to addressing the ongoing problems that households in Britain are facing with the rising cost of living.
Business Secretary Vince Cable said: “It is faster than inflation and that is the first time in six years that has happened.”
Shadow business secretary Chuka Umunna also praised the move, though he emphasised that Labour would have devised the proposal far earlier had they been in government. 
“Labour said last year that we need to see above-inflation rises in the minimum wage to restore the value lost over recent years,” he said. 
TUC General Secretary Frances O’Grady, welcomed the proposals, but called on the government to begin instigating regular and more substantial rises in the future in order to prove to the electorate that their policy aims are altruistic.
“This is a welcome increase in the minimum wage, which starts to recover some of the ground it has lost since 2008î, she said. 
“We hope this is the first in a series of bolder increases that will give real help to the low paid, and not just a pre-election boost.”
ëSlap in the face for low paid workersí
Despite the news generally being welcomed and praised across the business and political spectrum, there has been a small but growing group who have questioned how helpful a 19p rise will actually be for tackling the ongoing cost of living crisis.
One such individual is Len McCluskey, the general secretary of the Unite Union, who has branded the potential 3% rise as a “slap in the face for low paid workers.”
Mr McCluskey added: “An hourly rise of 19p for adults is an insult when the minimum cost of living has increased by a staggering 25% since the beginning of the economic crisis.”
However, the value of the rise has been met with general praise from employersí groups, who have outlined their belief that the nature of the rise is adequate to financially benefit both businesses and employers.
The British Chambers of Commerce conducted a study of its memberís attitudes towards increasing the minimum wage by 3%, and disclosed that the majority of its members are happy with the terms of the proposal. 
Its Executive Director of Policy, Dr Adam Marshall, said: “After years of pay restraint, companies now feel somewhat more confident when it comes to the question of pay.
“So while the Low Pay Commission’s recommendation appears to be slightly higher than many employers had hoped, it represents a reasonable compromise.”
The EEF and the CBI also gave the rise the green light, though they were naturally cautious about instigating a more severe rise or further increase on a more regular basis. 
The reaction to the news has been compelling, as the government usually adopts the policy suggested to them by the Low Pay Commission. 
Whilst Union groups are right to question how helpful a 19p rise will be to helping the poor combat poverty, the intriguing notion of a ëdomino effectí occurring with minimum wage rises in the future may be the more important piece of news to consider. 
The Low Pay Commission has essentially attached the future of the minimum wage to the economy, and its future trajectory will be compelling to follow, as policymakers will be tasked with determining when the economic recovery has reached a stable and sustainable phase in which further and frequent rises can be adopted. 
For now however, workers will have to deal with the reality that the 3% rise will do little to help their situation if they are part of the ësqueezedí lower earners, though the potentiality of regular increases in the future is nevertheless highly positive news indeed. 

 

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