Minimum wage to rise by 7p to £5.80

Published on Tuesday 12 May 2009 11:16

THE national minimum wage is to increase by 7p to £5.80 an hour, the Government announced today.

The new adult rate for workers aged 22 and over will come into effect in October.

The rate for 18 to 21-year-olds will rise from 4.77 to 4.83, while for 16 and 17-year-olds, the statutory rate will go up to 3.57 an hour from 3.53.

The Government said almost one million people will benefit from October's increase after it approved recommendations from the independent Low Pay Commission.

Business Secretary Lord Mandelson said: "The national minimum wage has been in place for 10 years and remains one of the most important rights for workers introduced in that time."

Lord Mandelson said he was proud of the difference the minimum wage had made to the lives of the UK's lowest-paid workers.

"It protects them from exploitation and also creates a level playing field for business, making a huge contribution to the UK's economic success.

"The Low Pay Commission has carefully examined the latest economic data before making their recommendations on the minimum wage rate, balancing the needs of workers and businesses in the current economic climate.

"The Government agrees with this assessment and has accepted the recommendations for these new rates to take effect in October."

The Government also announced it had accepted a Low Pay Commission (LPC) recommendation that the adult rate of the minimum wage should be extended to 21-year-olds, which will be implemented from October 2010.

George Bain, chairman of the LPC, said: "These are very challenging times for the UK and unprecedented economic circumstances for the minimum wage.

"We believe that the Low Pay Commission's recommendations are appropriate for this economic climate. They reflect the need to protect low-paid workers' jobs as well as their earnings."

Dave Prentis, general secretary of Unison, said he was pleased the Government had not listened to business groups which have been calling for the minimum wage to be frozen because of the recession.

But he added: "We think it should be increased by more than 7p an hour because it is hardly going to help low-paid workers pay the bills."

David Frost, director-general of the British Chambers of Commerce, said: "We pressed for a freeze to the minimum wage because of the severity of the downturn and the daily loss of jobs.

"We are pleased that the increase is only a modest one, and it shows that the Low Pay Commission and the Government have largely understood the seriousness of the situation. However, a freeze would have been more help to business."

The Fair Pay Network, a national coalition consisting of groups including Oxfam and Child Poverty Action Group, condemned the 7p increase.

Director Mark Donne said: "How infuriating that those who did least to cause this crisis in the economy will be least protected by its worst effects.

"An employee earning the minimum wage working full-time will earn around 11,500 per annum, and yet bodies such as the Joseph Rowntree Foundation state that a single person living in council housing needs 13,400 a year to afford a basic but acceptable standard of living. This falls short of that."

The increase in the adult rate is worth 1.2%. John Cridland, deputy director general of the CBI, said: "This moderate increase recognises that many businesses are struggling, and helps protect jobs at a time of rising unemployment.

"The inflation-busting rise some unions had called for would have hit firms hard and put many lower paid workers on the dole.

"Over the past decade, the minimum wage has risen faster than average earnings and inflation, and a sensible, cautious approach now will help ensure this landmark piece of legislation continues to improve the lives of low paid workers for many years to come."

Paul Kenny, GMB general secretary, said: "Even at times of financial constraints those workers on the minimum wage who are at the bottom of the earnings league require more help. They are the ones who have the greatest difficulties meeting the higher outgoings for rents, food, energy and transport.

"They deserve more than this 7p an hour increase. This is a missed opportunity by the Labour government."

British Retail Consortium director general Stephen Robertson said: "In its evidence to the Low Pay Commission the BRC said this year's increase must not be a penny more than 1.5%.

"The Low Pay Commission and Government have listened to our evidence. This is the right decision for these difficult times and exactly what we asked for.

"The best protection for wages is preserving jobs to keep people working and earning not handicapping employers with excessive new costs.

"1.2% strikes a common sense balance between helping low-paid workers and enabling retailers to maintain, and where possible, increase job opportunities."

John Wright, chairman of the Federation of Small Businesses, said: "Businesses should be free to negotiate pay levels with staff individually according to what is affordable during these tough times rather than keep up with a one size fits all pay rise.

"The FSB is grateful the Government has raised the minimum wage by only 7p but with 120 businesses closing a day and when many are struggling with cashflow, this is unfortunately another cost on employers.

"The minimum wage increase will add hundreds of pounds to the employer's wage bills and could lead to employers having to reduce hours, and possibly even cause further redundancies."