The National Minimum wage should rise by 3 per cent to £6.70 the Low Pay Commission (LPC) has recommended to the Government.
The Low Pay Commission has recommended that the adult rate of the National Wage should rise to £6.70 per hour from October 2015, and has said that the rise has been weighed carefully the risk of doing too little to raise the earnings of the lowest paid against the risk of recommending more than businesses and the economy can afford.
With inflation now forecast at 0.5 per cent, this recommendation would, if accepted by the Government:
- be the largest real-terms increase in the NMW since 2007, taking its estimated real value three-quarters of the way back to its highest ever level.
- increase the National Minimum Wage to its highest value relative to other wages.
- expand coverage of the number of jobs covered by the main rate of the minimum wage to an estimate of over 1.4 million.
- Commenting on the recommendation, David Norgrove, Chair of the LPC said:
“Last year we were pleased to recommend the first real terms increase in the value of the minimum wage since the recession. We argued that the minimum wage had proved its worth over the course of the slowdown, increasing relative to earnings generally and protecting the low paid during the downturn in a way not seen before albeit, as with wages for all other workers, its real value fell.
Sharp increases in the minimum wage would put jobs at risk – not least bearing in mind pressure on low-paying sectors and small firms. We do believe however that the continued recovery, and in particular the impressive growth in employment of the low paid, should this year allow a further increase in the real and relative value of the minimum wage.
An increase of 3 per cent to £6.70 is a larger real terms increase than last year and, on the basis of the most recent Bank of England inflation forecast, should restore three-quarters of the fall in the real value of the NMW relative to its peak in 2007.”
As well as its recommendation for the adult rate, the Low Pay Commission has also recommended:
- an increase of 3.3 per cent to £5.30 in the Youth Development Rate, which applies to 18-20 year olds;
- an increase of 2.2 per cent to £3.87 in the 16-17 Year Old Rate;
- an increase of 2.6 per cent to £2.80 in the Apprentice Rate, which applies to all apprentices in year one of an apprenticeship, and 16-18 year old apprentices in any year of an apprenticeship;
- an increase of 27 pence in the accommodation offset to £5.35. The offset is the one benefit-in-kind that can count towards the minimum wage. This is the maximum daily sum employers who provide accommodation can deduct towards those costs.