Higher wages for low paid workers are coming with both the Low Pay Commission consultation due to report to the Government by February and on Sunday Ed Miliband pledged a minimum £8 per hour wage by 2020.
Currently the minimum wage is £6.31 per hour, due to rise 3.01% to £6.50 per hour from the 1st of October. This is one of the biggest increases over the past 9 years since the minimum wage was first introduced. Yearly increases have averaged £2.85%. Ed Miliband’s proposed increase would mean six consecutive annual increases of 3.52%.
It’s interesting to see Ed Miliband jump on the minimum wage so soon after the Scottish Referendum, where all three party leaders appear to have incurred the wrath of their MPs with their last minute pledge to Scotland. It also comes just before the Labour party conference. An increase in the minimum wage is likely to appeal to large swaths of the electorate, especially those of course on the lowest incomes.
Of course if you raise the minimum wage the country also starts to save a whack on other benefits. The government subsidises low pay with Tax Credits and Housing Benefits, for example. 90% of people in London and the SE who receive Housing Benefits are in full time work. It does seem wrong that someone who puts in a full week’s work still has to rely on government handouts to survive, although the increase in income tax allowances has also helped in recent years.
We won’t know what the Low Pay Commission will recommend until next year, but Labour’s stake is now firmly in the ground with an £8.00 promise by 2015. The big question is, is £8 per hour in 2020 enough?
Currently the so called “Living Wage” is £7.65 (£8.80 in London). Assuming an annual 3.52% minimum wage increase it will be 2019 before today’s Living Wage is reached, by which time doubtless the cost of living will have risen sharply and the minimum wage still won’t be enough to survive on.
How will a steady 3.52% increase in the minimum wage affect your business? What do you pay your own workers currently? Would an £8 an hour wage overly impact your business’s profits or do you already have to pay a higher rate to secure quality employees.
More to the point do you think that Labour’s proposal of £8 per hour in six years time is enough? Do you think you could live on £8 an hour in 2020?